Turkey's import PE market set to reverse course in December

Turkish polyethylene players have started to express their expectations for the last month of 2021. An increasing number of players are convinced that the markets will come off from their multi-month highs due to unpromising demand as well as relatively eased supply woes.

The weaker outlook was also fueled by a bunch of other factors, including the year-end lull, low winter season, and a gloomy domestic economy.

Adding to the bearish scene has been the growing premium over China’s import market . Prices in China have turned down following a short-lived stabilization on hesitant demand, lower Dalian futures and bearish ethylene prices across Asia. ChemOrbis data suggested that Turkey’s premium over this market has grown to $300-450/ton depending on the product.

Sentiment faced spillover impact from weak PP

Turkey’s PPH market has faced downward corrections since November kicked off, as sellers yielded to waning demand. The sharp depreciation of the Turkish lira against its peers has hit local businesses especially hard, given that industry players have been already dealing with rising utility costs, inflationary pressures, and poor end demand.

It has not taken long for PE to respond as the local market showed the first signals of a slight softening toward mid-month. Many players concurred, “Lower PP prices have inevitably cast a pall on PE outlook.”



Activity ground to a halt due to tumbling lira

The USD/lira parity breached the 10 mark on November 12 and has hovered above this threshold since then. The Turkish lira has tumbled by around 42.5% since the beginning of 2021. Needless to say, the lira’s ongoing depreciation has notably curtailed trading activity for all polymers, including PE, in recent weeks.

PE consumers, who primarily serve domestic markets, are struggling to adjust to the new highs in the USD/lira currency, while purchasing power has reduced significantly.

On top of a bleak economic scene, the year-end lull loomed large as several players planned to handle their book closures. "We believe export demand from Europe and the USA will be tepid in the coming term given the approaching Christmas holiday. We are not planning to build up stocks heading into the new year," said a packager.

Size of possible drops under discussion

According to the weekly average data from ChemOrbis, November hikes have sent import PE prices to their highest levels in 6 months.

The projection for December calls for $60-70/ton drops from regular PE suppliers, initially. Traders argue, “The ongoing shipping hurdles across the board may cap downslide to some extent.” Players see less pressure on HDPE grades, saying supply is relatively modest.

Some other players, however, foresee that prices may face larger discounts. They point to a growing premium over China, easing freight rates compared to the September peak and possible pressure from competitive American cargos to justify their projection.

“If US cargos weigh down further on LDPE and LLDPE and the domestic producer, Petkim can not ramp up exports to Europe, the market may witness notable drops. We do not rule out the possibility of seeing some more European cargos in Turkey amid favorable €/USD parity,” opined a player. The euro/USD parity has come down to around 1.13 from 1.16 in the previous weeks.