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Turkish PP, PE players hold weak expectations for April as slow demand outweighs costs

by Merve Madakbaşı - mmadakbasi@chemorbis.com
  • 22/03/2024 (13:46)
Polyolefin markets are set to end March on a soft note in Türkiye, with buyers sticking to the sidelines amid muted derivative orders. Most players project softer PP and PE prices for next month, blaming a weak demand outlook and a potential relief in supply, not to mention the impact of the nearing holiday.

CIF Türkiye – Import prices– PP – PE

Both PP and PE see slight corrections in March

Although regular suppliers initially sought rollovers to modest hikes this month, converters pushed back firmer price goals. Buyers said they have had difficulty passing through soaring resin costs onto their end customers since early Q1, when the Red Sea crisis started to wreak havoc on the industry and pushed shipping costs north.

Suppliers had to trim their March offers to generate better buying interest, whereas the Ramadan lull kicked in and a lack of confidence in downstream demand kept purchases at a bare minimum.

Moreover, supply concerns faded as healthy netbacks and downward corrections in freight rates attracted irregular Turkmenian, Kazakh, South Korean and Chinese PPH offers, to Türkiye. For PE, Iranian supply aided the market and let buyers meet their limited requirements, particularly for HDPE film and LDPE.

According to the weekly average data from ChemOrbis, Middle Eastern import PE prices edged down by $5-20/ton (1-2%) as compared to late February. As for PP, Saudi Arabian homo-PP raffia, fibre and injection offers retreated by $10-40/ton (1-3%) in the period, with fibre seeing the largest drop, yielding to tepid demand and resuming capacities in Saudi Arabia. Following suit, Saudi Arabian PPBC injection prices eased by $30/ton (2%) as downward corrections for South Korean origins amid lower shipping costs weighed on suppliers.

Cash flow issues come to the fore once again

This week, an increasing number of players commented, “Cash flow problems have started to be felt more profoundly now that local elections are around the corner. Expensive and limited bank loans weighed on resin trading, leading players to hold onto their waiting stance as they do not foresee a firm trend next month.”

Despite expectations of a higher currency on the side of exporters regarding the post-election period, Türkiye’s Central Bank raised interest rates as part of the fight against inflation on Thursday, strengthening the Turkish Lira against its peers.

More cargos on way for April/early May arrival

Adding to the pressure on polyolefin markets has been the arrival of delayed cargos this month, let alone the downward corrections in freight rates. Players reported limited homo-PP and copolymer supply in the prompt market, though. “The local producer, Petkim, also has tight raffia availability due to bulky sales volumes back in February and a previous production hiccup,” multiple players noted. Nonetheless, Saudi Arabian and South Korean producers issued modest discounts to boost their sales in the import market.

Likewise, availability for certain PE grades eased thanks to the arrival of previously secured cargos in late December and early Q1 2024, when panic buying was observed on the side of manufacturers given the logistic mishaps.

“HDPE grades loosened owing to ample Iranian supply and waning demand. We also heard plentiful Iranian LDPE cargos found their way to the southern regions,” a player said. A PP converter expects resin supply to loosen further until early May considering a new wave of arrivals.

Possibility of drastic drops ruled out as costs remain high

On the other side of the coin, cost support lingered heading to the end of March amid high monomer prices and bullish forecasts in the oil market for the coming term.

According to traders, this, along with still high shipping costs, will limit potential discounts. Meanwhile, freight rates are still well above the pre-Red Sea period, despite the steady losses observed over the past few weeks. Long lead times also remained intact, but thin orders from end-users coupled with a long break during the Eid al-Fitr holiday will continue to curtail resin demand.

Elsewhere, players plan to monitor the sustainability of the recent firming in China as gains in crude oil futures cautiously lifted the sentiment this week. Nonetheless, demand remained in the doldrums and kept players on edge. In nearby Europe, ebbing demand caused suppliers to trim their hike goals, while PP appeared more resilient than PE on tight supply. Players’ focus turned to the imminent April monomer contracts in the region, with the Easter holiday being around the corner.
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