Türkiye’s PP, PE markets shoot up on logistic turmoil as 2024 starts

Polyolefin prices witnessed a swift rally following the New Year holiday, while soaring shipping costs and delayed import cargos paved the way for notable hike requests from regular suppliers. Demand for PP and PE has been robust, moreover, with buyers being particularly interested in prompt or nearing materials as the Red Sea attacks disrupted global supply chains.

Ocean freight rates have climbed further after a missile attack on a Maersk ship over the weekend caused carriers to suspend plans to resume transits through the area. Hundreds of commercial vessels have been rerouted around Africa’s southern Cape of Good Hope due to the ongoing security risks.

Supply chain delays send Middle Eastern offers to multi-month highs

Saudi Arabian homo-PP prices neared or hit the $1000/ton CIF threshold in late December. This was because the breakout of the Red Sea crisis started to prop up the sentiment among sellers by the middle of last month, at a time when most of them had already cleared their stocks.

Reduced supply from Russia coupled with a planned turnaround at a Saudi Arabian producer for February reinforced jitters about supply, while PPH offers neared or reached the $1050/ton CIF mark at the beginning of the week before seeing additional hikes.

Prices rose almost on a daily basis, while some players reported hearing Saudi Arabian PP fibre prices even above $1100/ton CIF Türkiye towards the end of this week due to a lack of adequate supply. A buyer opined, “Some sellers try to apply surcharges to their prices, while PP fibre may be heading for $1200/ton CIF. Nonetheless, this would force more converters to shift to polyester.”

Import PP prices were assessed mostly $70-80/ton higher week over week by ChemOrbis, while the weekly average data pointed to the highest levels in around 8 months. “Raffia and fibre prices have been few and far between since last week, while the early-week low ends quickly faded for origins subject to %6.5 customs duty,” multiple players said.

Similarly, Middle Eastern PE offers for January were revealed with increases of up to $100/ton from last month, driven by spiking container prices and delayed shipments, which kept supply from the region limited. On top of that, the news that a regional producer is readying to conduct an LDPE turnaround kept the market on edge.

Although downstream activity was not that encouraging, the recent logistic turmoil wreaked havoc on the market and bolstered resin demand amid panic buying. Offers moved above the $1050/ton CIF Türkiye mark on the high ends for all PE grades, while LDPE and LLDPE moved back to the October highs. Meanwhile, HDPE film hit its highest level since May 2022.


Players report delays of up to 20-30 days in ETA

Many polyolefin buyers reported facing delays in their previously secured cargos from the Middle East, with December shipments being postponed to January. “This means these cargos will not arrive before early March, which triggered panic among players,” said a manufacturer. Regional producers also pointed to uncertain transit times, adding, “The situation will give a rough ride to PP and PE players in the coming term.”

Premium over China’s import markets widens

In the meantime, import Middle Eastern PE prices regained their premium over prices in China following the recent wave of stiff hikes. According to the weekly average data from ChemOrbis, Türkiye’s premium over import prices in China widened to $50/ton for LDPE and $100/ton for LLDPE, HDPE film after both markets traded almost at par for all products back in December.

As for PPH, the premium of Saudi Arabian raffia prices on CIF Türkiye basis over the import levels in China grew to $155/ton as compared to $85/ton last week, reflecting the visible impact of disrupted import supply on the market.

Local markets see no respite from hikes owing to vivid demand

Following suit, the distribution channel added to its gains this week in response to diminishing stocks on the sellers’ side and vivid buying interest for prompt cargos. ChemOrbis data revealed that the local PP raffia market has posted a cumulative increase of $175/ton (14%) from a month ago, while PE gains reached $95-130/ton (7-10%) in the period.

“Rapid hikes in the import market and limited allocations amid logistic mishaps will lead to further increases in the coming weeks. Distributors opt to stick to the sidelines as they are not sure whether they will be able to replace stocks anytime soon. The rumor has it that freight rates for truck transportation may also increase given the recent situation,” a player commented.

How long will supply curtailments pervade PP, PE markets?

Most players agree on the fact that the abrupt price hikes stemmed from deepening supply concerns rather than a revival in derivative segments. Some of them believe that disruptions will continue to affect polyolefin markets into February, with longer lead times and more-than-doubled shipping costs.

Yet, others point to the high risks of the recent turmoil, saying, “The market may face bulky volumes arriving by March and April, which would weigh on resin prices unless downstream demand recovers and financial issues ease to some extent. We have concerns about whether the cost of the material will be above the market when the time comes.”

Apart from that, concerns over inflationary pressures have come to the fore since the crisis broke out in mid-December. “Sharp increases are usually followed by steep decreases when conditions normalize, which keeps markets edgy. The shipping bottlenecks and rising resin costs will keep inflation high and weigh on consumption at some point,” a player noted.