Turkish PP and PE players adopt a cautious stance as 2024 nears its end

Import PP and PE prices in Türkiye continued their downward trend in November, driven by year-end stock clearances from suppliers and subdued downstream demand across most industries. At the same time, year-to-date lows stimulated some restocking activity on the side of buyers. Polyolefin offers have been declining since August, led by reduced consumption and gradual drops in shipping costs while players started to discuss whether the market bottom is approaching.

The weekly average data from ChemOrbis suggested that prices have slumped by 12-13% ($140-165/ton) for PPH and by 6.5-8% ($70-95/ton) for PE film grades in total during a four-month bear run. This was accompanied by a cumulative $6/bbl (8%) slump in Brent oil futures.

A psychological threshold for PP: $1000/ton CIF

Multiple PP sellers believe that the market has already bottomed out and will stabilize in the near term. A source from a global producer stated, ’We are no longer under stock pressure, thanks to steady sales throughout the month. The market may recover in December if sellers adopt a firmer stance, although we do not anticipate a rebound given the year-end book closures and globally moderate demand.

Traders remarked, “We may be on the brink of stabilization, if not an upturn, as we have heard that a Russian producer will not supply any PP cargoes next month. Additionally, higher freight rates from Far East Asia are likely to support sentiment.”

In November, Saudi Arabian homo PP raffia and injection deals reached the $1,000/ton CIF Türkiye mark, considered a psychological threshold for many players. Large-scale buyers managed to secure slightly lower transactions, though levels of $980-990/ton CIF were not widely available. Meanwhile, PP fiber prices broke below the $1,050/ton CIF mark at the low end, with the lowest confirmed deal at $1,040/ton before suppliers sold out their allocations.

Converters continue to place buy ideas below $1,000/ton CIF, arguing that the final month of the year will pressure sellers to offer further discounts to support sales as their production remains ongoing. A manufacturer commented, ’We are still operating at 50% capacity due to subdued derivative orders from both domestic and export markets ahead of Christmas. We expect to see more offers below $1,000/ton CIF during the early December fair before the market bottoms out.”



Aggressive US PE offers may fade after bulky sales

Middle Eastern producers have faced stiff competition from aggressive American HDPE and LLDPE offers since October, forcing them to concede to $980-990/ton CIF on deals in some cases. A buyer commented, “We believe US sellers may have completed their depleting activity after achieving substantial sales throughout November. We have not received any offers recently, and some traders have cautioned that their suppliers might not provide these low levels next month.”

In November, US HDPE film, b/m and inj. offers were confirmed as low as $920-930/ton CIF Türkiye, subject to 6.5% duty, while LLDPE film slightly broke below $950/ton on the low end. “US sources may go to sidelines by mid-December after handling their pre-Christmas shipments,” a player commented.

Markets in flux amid bleak end demand and low margins

The sustainability of resin demand remains uncertain due to subdued activity in derivative markets and ongoing macroeconomic headwinds in Türkiye. While buyers have not ruled out the possibility of a nearing market bottom, rising shipping costs have prompted some to purchase in advance as a hedge against a traditional January upturn. Most buyers have already secured their needs for early 2025, which could lead to slower demand next month. Conversely, some converters have postponed part of their purchases until Plast Eurasia, where they plan to seek further discounts.

Looking at Türkiye’s narrowing premium over Asia, PP prices have no room for large drops. Discounts may be minor unless Asian PP outlets post notable drops, not to mention firmer freight rates from the region. The premium of Saudi Arabian PP raffia prices over China’s import market have been steadily falling since September to hit $125/ton in November. The gap was as large as $260/ton in August. Similarly, the gap with SEA fell from $185/ton to just $35/ton in the same period.

As for PE, Türkiye’s LDPE market offers a negative netback nowadays as it is currently trading $10/ton below China and $65/ton below SEA. The premium of LLDPE over China was down from $130/ton in August to $70/ton in November while the gap with SEA is down from $90/ton to $10/ton. Türkiye’s HDPE film market trades $10/ton above SEA compared to the previous premium of $80/ton while its premium over China fell from $140/ton to $75/ton.

A tug-of-war seems around corner for December

Most players believe that polyolefin markets are unlikely to revisit the lows of December 2023, with prices expected to stabilize next month following further, albeit modest, declines during the year-end lull. This outlook is driven by the assumption that poor margins may deter global suppliers, especially if they find better netbacks in other PP and PE markets. As a related note, the recent measures on compound imports drove a relatively improved sentiment for HDPE film amid a potential drop in supply.

Nonetheless, PP and PE buyers intend to push for slight discounts at the major industrial event next month. They will be citing factors such as lower anticipated olefin contracts, the persistent year-end lull that could keep inventories low among converters, and the absence of upward momentum in nearby Europe and Asia amid ample availability and unpromising demand outlook.