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Turkey’s PPH market deadlocked on limited supply, large gap with China

by Merve Madakbaşı - mmadakbasi@chemorbis.com
  • 15/01/2021 (14:34)
PP prices in Turkey followed a mostly stable trend over the week amid mixed factors including relatively cautious demand, limited supply and divergent pricing trends in Europe and China.

Import Middle Eastern PPH prices are currently carrying an all-time high premium over prices for the same origin in China, the weekly average data from ChemOrbis reveal. The growing gap with China has been a factor that put players on edge in the recent days and dimmed activity for certain PP grades.

Turkey’s PPH market had mostly lacked a healthy premium over China during July-November 2020, before the price gap between the two markets soared to above $150/ton in early December. This was because a logistic crisis amid severe equipment shortage, COVID-19 outbreak and robust exports ahead of the year-end led to unprecedented freight hikes worldwide.

As December proceeded, Turkey’s premium for Saudi Arabian cargos over China grew to $200/ton before hitting as high as $235/ton as of mid-January. This was in sync with softer China market and additional hikes to Turkey .

Expensive shipping costs, a-year high global oil benchmarks amid vaccine optimism and upcoming Saudi turnarounds for late Q1 continued to hold the market firm. Yet, an increasing number of players started to approach bullish talks of sellers for the coming term with skepticism.

Import- PPH Prices – Turkey vs China

On demand side, sellers admitted that buying interest subsided compared to early January. “PP raffia demand has waned particularly amid low sack season while PP non-woven and injection fared better. The market may see corrections at some point considering the softer trend that has been in place in China since December which keep demand tied to needs in most cases,” opined a converter. Another player said Turkish buyers were paying higher prices than China and Vietnam due to freight differentials.

Southeast Asia’s PP market has been feeling the same pressure from the easing in China lately. Import prices in the region have been softening since December 2020 under the shadow of competitively-priced Chinese PP cargos, renewed lockdowns in Malaysia and Indonesia and the nearing Chinese New Year holidays in mid-February.

Considering attractive margins, more imports would be expected to make their way to Turkey if it weren’t for upcoming turnarounds in Saudi Arabia and healthy demand in Europe, where tightness and higher propylene contracts sparked 3-digit hikes this month.

Freight rates may start to level off by around mid-February or early March. Indeed, downstream players in China are already leaving their desks ahead of New Year holidays, which weighs on demand further along with renewed restrictions in the country. However, sellers believe that some PP shutdowns in March and a-year-high oil prices may hold the Turkish market in the near term.
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