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Türkiye’s PP market signals stabilization on supply limitations

by Merve Madakbaşı -
  • 10/05/2024 (02:23)
Import PPH prices seem to have snapped a two-month downfall as diminishing import supply came to the fore again. Long transit times on the side of most Saudi Arabian producers, coupled with rising freight rates from Asia to Türkiye, drew a tight supply outlook for the coming term, let alone an ongoing lack of volumes from Russia and Israel.

Import Prices– PPH – CIF Türkiye

Players hunt for signs of market bottom

PP raffia deals for dutiable Middle Eastern cargos were confirmed slightly below the $1100/ton CIF mark by late April, albeit only for special cases and certain grades. This was driven by a lack of demand support from derivative segments. Nonetheless, most offers managed to hold at or a bit above this threshold as availability from the region remained restricted, with the transit issues emanating from the Red Sea disruption not seeing much improvement.

Similarly, multiple buyers concurrently said regional PP fibre prices stabilized at $1150/ton CIF or slightly above this level, despite lower bids. “The suspension of trade with Israel caused partial jitters among players over supply, although this country is not a major supplier to Türkiye. Traders seemed relatively reluctant to give further discounts for Egyptian cargos following the news or even talked about potential gains,” a player noted.

As per ChemOrbis data, the weekly average Saudi Arabian import PPH prices hovered around 4-month lows this week after an increasing number of players reported hearing steady offers from early May.

Traders report a slight increase in inquiries

Participants reported that demand from end-product markets stayed stable amid the depreciation of FX rates that disappointed exporters and rampant inflation that hindered domestic consumption. This is to say, macroeconomic headwinds continued to pervade commodity markets.

Nonetheless, dwindling supply sources started to offset bearish factors, including demand concerns, the impact of the nearing Eid al-Adha holiday in mid-June on trading activity and falling upstream costs along with crude oil’s slump.

A global trader commented, “We were able to conclude some PPH deals, albeit at the low end of the market, as limited import volumes lured some manufacturers back to the market. Sellers do not want to concede to any further drops based on firm price levels in China and India, as well as long delivery terms that keep prompt supply modest.”

A lack of competitive offers from Asia adds to scene

Back in late Q1 and early Q2, Turkish buyers received Chinese homo-PP offers at levels matching the low end of the overall import market. This was because downward corrections in shipping costs paved the way for these cargos to find their way to foreign destinations, considering China’s need to boost its exports amid a supply overhang domestically. Moreover, duty-free South Korean PP cargos were traded at competitive levels in April.

However, the recently soaring freight rates from South Korea and China to Türkiye have prevented the market from getting attractive PPH offers from Asia. Moreover, import offers in China held firm following the long Labor Day holiday on the back of limited import volumes, which propped up the sentiment among sellers in Türkiye.

A converter opined, “We have not been hearing any ex-China cargos recently. Based on netbacks to China, prices could stand at around $1150/ton CIF, lacking competition power against the current Middle Eastern origins here.”

Is it too early to talk about an upturn?

Several players say “Yes, it is”. They believe that PP will move within a narrow range, with small fluctuations unless downstream activity picks up. They cite lower production costs and macroeconomic headwinds that keep purchasing power low on the side of resin consumers and end users.

Now that the sentiment has cautiously stabilized, players have started to discuss whether prices can shift up or not, considering a bunch of factors. Supply constraints will underpin the market in the coming term, with a planned turnaround at a Russian producer in July. Indeed, spot Russian volumes have been modest since the beginning of 2024, following intense destocking activities back in late Q4 last year.

“South Korean prices signaled a firming in response to surging shipping costs. Prices may hold onto current levels, or we may see an upward correction if China’s import market remains strong,” a player noted. Türkiye has been trading around $200/ton above China’s import homo-PP market since early April, as per ChemOrbis data.

On the other hand, oil prices have slumped more than 7% from their April highs due to demand concerns, despite edging higher later this week. Looking at lower naphtha and propylene prices in the key markets, sellers may not be able to raise their PP prices. This is considering the possibility that buying interest may fizzle once again due to the Eid al-Adha holiday next month.

A PP converter said, “End-product orders are stable with not much improvement while we struggle to recover our margins given tough competition in the industry. Derivative products are sold at very low prices, while the appreciation of the Turkish Lira triggered jitters among exporters. The holiday lull may put a strain on PP next month at home, let alone the impact of nearing summer holidays in Europe on foreign business.”
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