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Upsurge continues to wreak havoc on Turkey’s PP, PE markets

by Merve Madakbaşı - mmadakbasi@chemorbis.com
  • 26/02/2021 (10:09)
Turkey’s import polyolefin markets have seen no respite from abrupt increases, with PP continuing to take the lead. Short supplies spurred price inquiries as global production hiccups coupled with rising upstream costs kept March expectations bullish. Yet, the never-before-seen levels kept players on their toes and caused some buyers to idle operations.

PPH prices spiked 38-45% from a month ago

The run-up was pioneered by PP around 3 weeks ago. Netbacks marched higher in Europe and America due to supply woes and vivid demand, causing sellers to moderate their allocations to Turkey. Moreover, Turkish players were caught with modest stocks since the scale of upsurge beat earlier expectations.

An ongoing turmoil in the shipping industry amid sky-high freights and an equipment shortage coupled with plant shutdowns and force majeures driven by snow storms in the US Gulf Coast made things even more difficult.

The weekly average of the import PP raffia market (consisting of all origins) has soared almost $530/ton (38%) when compared to the end of January, hitting its highest level since August 2008. Data from ChemOrbis further suggested that PP fibre hit an all-time high as prices have surged $635/ton (45%) in the same period.

According to the Product Snapshot obtained from ChemOrbis below, PP increases in Turkey surpassed those of some other markets amid a reinforced tightness. Regular suppliers diverted their cargos to other outlets starting from late January citing then-mild demand in Turkey, which left players empty-handed and fueled astronomic hikes in February.

*Right click the image and open in a new tab to view the full-sized snapshot.

PP Prices – Import – Turkey – Europe – China – Southeast Asia

PE jumped 20-23% as a lack of US, Iranian sources bites

According to the weekly average data from ChemOrbis, import LDPE film prices rose 20% ($300/ton) from a month ago and hit their highest level since September 2008. HDPE film and LLDPE C4 film have surged around 23% ($290/ton) in the same timeframe to reach their highest levels since November-December 2014.

CIF Turkey – Import Prices – LDPE – HDPE– LLDPE

March PE offers from the Middle East have yet to be unveiled, while expectations hint at sizable hikes for next week, assuming that the current plant issues and logistic crisis across the board may not be solved anytime soon. Indeed, a Saudi Arabian producer has already issued $200-250/ton increases for LDPE and LLDPE film towards the end of the week.

Bullish March expectations in nearby Europe on the heels of short import supply, buoyant demand and higher expected ethylene contracts also contributed to the sentiment. Turkey also lacks material from regular American and Iranian suppliers which keeps supply outlook unpromising particularly for LLDPE.

Price gap with Europe and China widened

In the meantime, Turkey’s price gap with other outlets has grown higher for certain grades recently. The premium of North West Europe’s spot markets over Turkey rose to $190-200/ton for LLDPE and HDPE on a weekly average. Assuming that the European market will extend its hikes into March, Turkey may continue to lack import volumes in case sellers continue to focus on Europe. For LDPE, Turkey trades $85/ton below Europe.

On the other hand, Turkey’s premium over China widened to $300/ton for the same PE products, ChemOrbis data reveal. Although a Saudi Arabian major issued $170-180/ton increases for both PPH and PE to China following the Lunar New Year holiday, the increases obviously lagged behind the rally in Turkey. Turkey’s PPH market still carries a massive premium of $600/ton over China, keeping an arbitrage window open. This accounts for Chinese PPH offers that have been present for 2 weeks in Turkey.

Unaffordable resin hikes forced some converters to cut running rates

Turkish manufacturers have been shocked by tremendous resin hikes during the last few weeks while they struggled to sustain their production due to a lack of adequate supplies and delayed deliveries.

Carpet makers in the southern region started to idle their factories in order to cope with overwhelming price hikes, according to players. Some others opted to pay massive increases in a bid to fulfill their orders on hand.

A packager said to ChemOrbis, “The recent increases are unaffordable for many buyers, while fears of a prolonged tightness into April cause jitters among players. This will eventually hinder demand as we are unable to reflect such costs onto our finished goods prices.”

Supply relief seems unlikely for the near term

Players expect availability to remain problematic during March and April pointing to the ongoing outages across the globe. Nowruz Festivities will reduce supply from Iran further next month, while it remains to be seen for how long US facilities will remain offline.

Also, tight freights may continue to pervade the commodity markets until the end of Q2, which underpins strong expectations for the upcoming days. As a side note, buyers reported, “Sellers started to ask for pre-payments in order to ensure themselves in case of disruptions in deliveries or risks of cancellations.”
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