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Turkey’s PP market starts to stabilize, will other polymers follow suit?

by Merve Madakbaşı -
  • 11/06/2021 (23:14)
PP prices in Turkey have signaled stabilization in the last two weeks following a nosedive back in May. More players seem convinced that the market has recently reached its bottom. Now this is the question arising about the trajectory of other polymer markets, which have also sunk to multi-month lows: "Can PE and PVC follow suit?"

Prices – Homo-PP – LDPE – LLDPE – HDPE – CIF – Turkey vs. China

Import PPH offers reached a plateau as demand resumed

Homo-PP prices have posted cumulative declines of $651/ton (33%) for raffia and $763/ton (35%) for fibre since around mid-March when the market turned down in response to waning demand, the weekly average data from ChemOrbis overall import index revealed.

Prices had skyrocketed by $542/ton (38%) for raffia and $673/ton (45%) for fibre in total during tightness-driven hikes in massive amounts back in February, data also suggested.

Buyers returned to replenish some stocks as June kicked off after skipping their purchases in April and May. A market consensus that a price bottom was nearing, based on the closure of arbitrage window from Asia amid inflated freights and relatively easing stock pressure on sellers, tempted buyers.

“We opted to purchase some volumes in the midst of slowing decreases and the gradual easing in Covid restrictions. First and foremost, we needed to lower our costs emanating from the higher-priced cargos that arrived,” explained a buyer.

Prices at or close to $1250/ton for raffia and $1300/ton for fibre for origins that are subject to 6.5% duty were accepted by PP converters. “We do not expect any visible decreases for PP from now on since Chinese offers have almost disappeared amid closing arbitrage opportunities on the side of sellers,” noted consumers.

Traders agreed, “The market seems to have settled nowadays since prices have no further room to move down, taking multi-year high oil prices and rising naphtha costs into account.” Indeed, Turkey’s premium over China’s import PP raffia/inj. market stands at around $135/ton, while another round of hikes in shipping costs will most probably repel Asian suppliers.

LDPE set for further decreases, expectations vary for other grades

PE has seen no respite from the bearish trend as sellers have conceded to additional declines to bolster demand. While talk of a PP bottom has yet to have a significant impact on PE, a greater pressure appeared on LDPE given comfortable supply and 7-month low prices in China.

Middle Eastern import LDPE lost another $30/ton from last week to be assessed at $1500-1520/ton CIF Turkey, subject to 6.5% customs duty, cash. For some producers, the total monthly decreases for June have approached $300/ton.

“We expect prices to break below $1500/ton soon amid lukewarm demand. China’s downward pressure persists," participants agreed. According to ChemOrbis data, Turkey carries a premium of slightly more than $300/ton over China’s import LDPE market nowadays, which rationalizes weak expectations.

In the meantime, sentiment appears to be blurry for LLDPE and HDPE. Buyers maintain their bearish expectations for the short-term, citing discouraging demand in China.

Import offers on CFR China basis shrugged off multi-year high oil prices and were assessed $20-40/ton lower this week, while freight-hit exports and upcoming capacities weighed on consumption.

However, some traders believe that the stabilizing PP trend may prop up some PE grades. The bottom for HDPE and LLDPE might be nearing, considering Turkey’s narrower premium of around $160/ton over China’s import markets compared to the previous months.

In any case, the direction of China’s import market will be under close watch. Prices have been on a downtrend since unsupportive demand, lower olefin prices in Asia and the pressure of upcoming polyolefin capacities outweighed the impact of the bullish energy complex in this major market.

Gloomy sentiment remains in place for PVC

Import PVC prices sank to their lowest levels in 4 months as sellers yielded to persistently muted demand and applied additional drops in their June prices this week. The sentiment was unresponsive to stabilizing sentiment for PP due to a series of factors.

The ongoing limitations from European suppliers have failed to offset the impact of lethargic demand and alternative sources from Iran, Ukraine, Egypt, and Pakistan that have provided competitive prices. Now that a Taiwanese major is expected to issue July decreases of $100/ton or even beyond to the Asian markets, Turkish players see new price cuts on the horizon.

“The speed of recovery in the key Indian market will be a key factor to monitor over the coming days. Turkish converters do not have much purchasing power, which also keeps trading volumes tied to needs in most cases,” opined players.

A large trader added, “We are more confident that PP has bottomed out even if we do not project an upturn anytime soon. Yet, LDPE and PVC prices have further room to move down, based on current demand dynamics in Turkey.”

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