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Türkiye’s PP, PE markets open June on firm footing due to limited supply

by Merve Madakbaşı -
  • 07/06/2024 (08:45)
Polyolefins have posted price hikes regardless of the short working month of June, with supply constraints coming to the fore and mitigating the impact of tepid downstream demand in Türkiye. However, a recent plunge in global oil markets, driven by OPEC’s decision to phase out output cuts gradually next year, cast a pall over the upward trend.

PP prices hit the bottom back in April, earlier than PE, as import availability from Saudi Arabia, South Korea and Russia dried up and pushed the market north amid turnarounds at the time. Although prices followed a steady trend in early Q2 given demand woes, sharply higher freight rates led to improved sentiment on the sellers’ side and lured buyers back to replenish some stocks.

Following suit, PE prices stabilized in H2 May, with pressure stemming from steep increases in Asian markets becoming prominent on LDPE, rubbing off on other grades and helping sellers renew confidence.

Import Prices – PP Raffia – LDPE – LLDPE – HDPE – CIF Türkiye

Netback pressure provides upper hand to PE sellers

Higher June offers from the Middle East did not catch players’ surprise as the premium of PE prices on CIF Türkiye basis over China’s import market moved below $100/ton, creating an upward pressure. Import offers were at par with or even below the levels in Southeast Asia, causing jitters among consumers that allocations from global suppliers to Türkiye may be reduced more amid poor netbacks, not to mention container shortages from Far East Asia.

This week, Middle Eastern LDPE film offers were assessed $40/ton higher at $1170-1200/ton CIF Türkiye, subject to 6.5% customs duty, cash. The market was bolstered by tight import volumes for certain LDPE grades. Although still-unfavorable netbacks deterred regional sellers from Türkiye and caused them to direct most of their allocations to other regions, some LDPE film consumers seemed unwilling to engage in fresh CIF cargos, blaming their long transit terms of up to 3 months.

As for other commodity grades, Middle Eastern LLDPE C4 film rose by $20-30/ton to be assessed at $1050-1080/ton with the same terms. “Demand has been vivid for materials with slip,” traders noted. HDPE grades have been the weakest in terms of demand given the long Iranian supply in the prompt market, while the range was up by $20/ton on the week to $1050-1070/ton.

Reduced import volumes pave the way for new PP gains

Having pioneered a firmer sentiment in polyolefin markets since last month, PP extended its gains into June, with offers recording new gains, particularly on the low ends of the ranges. A source from a global producer said, “We lifted our list prices due to squeezed margins and higher shipping costs. Our stocks have been limited both for Saudi Arabian and European origins, with transit times from the Middle East taking up to 3 months now. Meanwhile, demand from textiles, sack and carpet industries has been calm recently as the holiday lull kicked in and economic gloom persists.”

This week, Saudi Arabian PP raffia prices were assessed $10/ton higher at $1130-1150/ton CIF Türkiye, subject to 6.5% customs duty, cash basis amid vivid sales. Fibre for the same origin was assessed stable at $1170-1190/ton with the same terms, with some other nearby sources rolling over their prices on the month to boost their sales ahead of the holidays.

“Prices at $1120/ton for raffia and $1150/ton for fibre faded away after last week’s transactions. However, waning activity kept hikes in check this week,” converters said.

Falling crude prices, nearing holiday cap larger hikes

The main drivers behind the recent uptrend have been tight imports for PPH, LDPE G03-5 and LLDPE C4 film with slip amid production hiccups, dwindling prompt supply and longer transit times emanating from the prolonged Red Sea issues. Reflecting higher import prices, waning prompt availability and active demand in late May, local PP raffia and LDPE prices continued to trend higher this week.

Nonetheless, derivative segments continued to grapple with tight liquidity while exporters complained about low FX rates that hammered their businesses. “The approaching holiday in Muslim countries coupled with the upcoming summer break in Europe keep markets on edge. Resin purchases have been cautious during the last few days,” a trader commented.

LDPE buyers said, “We prefer to meet our needs from the local market or nearby sources of Europe and Iran, despite their rising offers. It may be risky to have material on the way for autumn delivery given the foggy downstream demand outlook at home and in export destinations.”

Although PP players expect high shipping costs and supply jitters to keep the market firm in the coming term, they pointed to the recent slump in global oil benchmarks, which clouded the market. Also, a source from a Middle Eastern producer admitted seeing disappointing HDPE film and b/m demand, saying, “We may trim our initial price hike.”

According to ChemOrbis Price Wizard, crude oil futures still indicated a weekly fall of $4-5/bbl at the time of writing despite the recent recovery on Thursday. Lower futures caused the upbeat to falter in Asian PP and PE markets, along with adequate domestic stocks inside China, following May gains triggered by soaring transportation costs.

Overall, Turkish polyolefin players hope to see an uptick in derivative demand following the holiday that will be celebrated on June 16-19. Yet, eyes will stay on the energy markets and global PP, PE indications in the coming term.
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