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Turkey's polymer markets deadlocked as lira’s freefall shatters all records

by Merve Madakbaşı -
  • 26/11/2021 (03:09)
The Turkish lira faced a collapse against its peers on Tuesday before paring some of its losses later in the week. In the midst of an unstable parity, players maintained their "wait and see" stance, while economic concerns have wreaked havoc on polymer demand.

Lira nosedived around 15% before erasing some losses

The USD/lira parity breached the 13 mark on November 23 while the euro/lira currency touched above 15 before both cooled off to some extent on November 24. As of Thursday, the Turkish lira still indicated a cumulative loss of 8.5% against the USD in just a week, while the cumulative depreciation neared 60% since 2021 started.

Several manufacturers suspend end product sales

The freefall in the lira prompted several converters to suspend their sales of end products. Polymer consumers who serve the domestic markets were hit hard by the ongoing spike in the USD and euro to the Turkish lira, as most of them procure raw materials on a dollar basis but sell their goods in local currency and mostly on deferred letters of credit.

“Many packagers paused their sales, citing their inability to set a price in the heat of the fluctuating parity. Bank transactions faced temporary disruptions, moreover,” players affirmed.

Converters have already been reporting a slowdown in export business given seasonal factors. A buyer said, “Under normal circumstances, the spike of the dollar should have buoyed export activity. However, Turkish consumers have been struggling with the fact that most of the inputs are imported, which has stymied the impact of the favorable currency.”

Local –PP raffia – PVC K67 – LLDPE – LDPE – Ex-warehouse Turkey

Polyolefins and PVC markets call for new price cuts

Polymer markets have been under pressure from parity-hit demand and off-season since late October. Adding to the scene has been a bleak economic scene as well as the nearing Christmas holidays in Europe and the US, as all loomed over buying sentiment.

The locally-held markets retreated further over the week, while CIF-based cargos lacked buying interest, particularly for distant cargos. "The market activity has ground to a halt while we have not received any calls from our customers for the most part of the week. Demand has almost been nonexistent," traders affirmed.

Bearish December expectations were another factor keeping PP, PE, and PVC buyers on hold . "The previous losses in upstream costs and derivative prices in Asia, as well as the year-end lull across the board, have already spurred weak expectations for the last month of the year. Above all, the blurry economic outlook dimmed buying appetite further," players noted.

Lackluster demand and eased freight rates pushed Saudi Arabian PP raffia and fiber prices to $1620-1640/ton and $1710-1730/ton, respectively, CIF Turkey. These ranges were down by $30-60/ton on the week, while buy ideas were much lower than these levels. The import PE and PVC markets lacked fresh offers, while both continued to be pervaded by bearish expectations.

The locally-held markets retreated further, with PPH showing the most visible discounts. Accordingly, PP raffia prices were down by $70-80/ton in a week to break below the $2150/ton inc. VAT threshold on the low end. PVC K67 was assessed $20-30/ton lower at $2780-2850/ton, while LDPE and LLDPE c4 film shed by $20-40/ton.

PET and PS face pressure despite local tightness

Activity stalled for other polymers, including PET and PS, too as a knee-jerk reaction to a historic low lira. This was despite the ongoing tightness at local producers for both products. Unpromising demand outlook amid economic uncertainties dimmed sentiment, with some players voicing weaker projections for the coming month.

Although tight spot availability continued to hold the local market to some extent, parity took its toll on buying interest for both PET bottle and textile grades. Converters lamented, “We stopped sales as we could not set a price level for our manufactured goods. Most converters are trying to sell their end products on a dollar basis to avoid further losses in their margins.”

PS consumers said, “Lower styrene prices coupled with dampened demand may lead to price discounts next month. Although the positive outcome of the packaging fair kept activity robust in the first half of the month, the adverse impact of parity has loomed over the market recently.”

Players remain sidelined ahead of Plast Eurasia

Market players do not expect activity to recover anytime soon, while sellers hope to see a pick-up in buying interest during the 30th edition of Plast Eurasia. The fair will take place on December 1-4, 2021 in Istanbul.

Players noted, “We expect to hear much more competitive prices during the event as sellers may be willing to deplete their stocks ahead of the new year. Whether or not demand will respond in the shade of economic concerns remains uncertain for now.”
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