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What will October unfold for Turkey’s PE markets?

by Esra Ersöz -
  • 25/09/2020 (10:07)
Closing September on a firmer note, Turkey’s PE markets are poised to meet October under similar circumstances. Tight supplies notably for LDPE and HDPE are likely to help sellers seek hikes for another month, particularly when Turkey continues to trade below China. However, there are a few other factors that will crucially affect the direction of the market.

The China market spiked up notably for LDPE in the midst of short availability in the past one month, although this week import PE prices have seen some downward corrections, feeling the pressure from the local market and the losing streak in Dalian futures.

Turkey provides negative netback to China

Turkey’s PE market has failed to catch up with this upturn in China, resulting in lower import prices than those in China. Under balanced market conditions, Turkey would traditionally carry a premium over China given its smaller market size and freight differentials. Trading below the world’s largest buyer, Turkey is not providing a favorable netback for sellers in the Middle East and Iran, the main supplying regions for PE.

“Given Turkey’s negative netbacks, Middle Eastern sellers will prefer to divert their cargoes primarily to Asia, and also to South America and Africa to fill the absence of US suppliers. Therefore, there won’t be much stock pressure on Middle Eastern sellers next month,” a producer source argued.

That is to say, allocations to Turkey may not be a priority next month in an already tight market, which is likely to propel higher prices for another month.

Demand is cautious and fragile

Although the upward pressure from tightness and China is there, gauging demand is critical in Turkey due to the relentless depreciation of the lira against the dollar. Converters complain that their end business is not performing well while some are already covered until the year-end. Therefore, sellers may not remain indifferent to these complaints and rush to adopt a ‘take it or leave it’ policy for next month.

Will the weaker scene in Europe divert more cargoes to Turkey?

The other major factor restraining the upturn in Turkey is the European market, where the October scene remains stable to soft for another month in the wake of the expected drop in the upcoming ethylene contracts.

Turkish buyers have already enjoyed European PE offers in September more often than previous months at relatively competitive prices. Offers from regular and irregular regional suppliers from Europe showed up in the marketplace, forming the low ends of the overall ranges. The fall in the euro against the US dollar also helped block the increases from Europe to Turkey.
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