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Turkey’s PP outlook for September under discussion

  • 19/08/2016 (18:09)
Import PP prices continued to retreat for another week in Turkey while the outlook for September is under discussion these days amidst divergent opinions from market players. According to some players, the market is nearing the bottom and may even change direction next month based on bullish factors while others do not see an upturn possible before October given unpromising demand conditions in the country.

This week, PP sellers issued additional decreases on their import prices to entice some buying appetite as financial and political issues since mid-July kept trade depressed in Turkey. According to ChemOrbis Price Index, the import PP raffia market sank to its lowest levels of 2 months on a weekly average. Nevertheless, rising oil prices and the fact that Turkey traded below China last week improved sentiment among suppliers and several players commented that the bearish trend was nearing an end.

"We are close to the bottom for PP since propylene costs are firm in Asia amidst rising crude oil futures which neared $50/barrel recently thanks to talks of an output freeze. Moreover, prices in Turkey are already on par with the levels in China. The prevailing low end PP offers may fade soon as sellers may attempt to apply small hikes to test market response,” a distributor opined.

Additionally, the European PP market is projected to return from summer holidays on a strong path. A trader reported, “We received bullish signals from our office in Europe that PP prices may move up for September as demand is likely to increase after holidays there and costs are likely to be driven higher due to cracker shutdowns in the region.”

“Prices may not fall much further as Turkey is the lowest market already across the board. Overall, trading appetite is low at both buyers and sellers while supplies are sufficient,” a sack maker mentioned. Another one stated, “PP prices may come down a bit more, or at least they will not rise, that’s for sure as markets are not active and everyone buys and manufactures what they can sell. Dynamics change so rapidly in Turkey and thereby, no one builds up stocks in the recent months.”

Several bcf converters, meanwhile, commented, “The market may stabilize if oil prices stay high but it can’t turn up as there are severe financial problems and cash flow issues among companies. The market is dealing with other prominent factors rather than China or upstream costs these days and it may take some time to recover.” A manufacturer also pointed to the fact that China is not performing well despite the higher energy complex so far. “We don’t expect any further considerable falls in PP prices next month but demand, which is the current trend setter for Turkish polyolefins markets, may remain hindered until end September because of holidays.” A few traders also pointed to comfortable PP stock levels in the south of Turkey in particular.

Upstream, spot propylene costs increased by around $45/ton on FOB South Korea basis week over week. Spot naphtha costs also rose by the same amount in the period on CFR Japan basis. The main trigger behind soaring costs were crude oil futures which surged by around $5/bbl on NYMEX on the week. ICE Brent crude futures spiked almost $6/bbl as well which pushed spot ethylene costs up by €45/ton on FD NWE and naphtha prices up by $45/ton on CIF NWE basis in a week.
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