08 January 2014 16:42 [Source: ICIS news]
LONDON (ICIS)--The fall in the Turkish lira against the US dollar over recent weeks has caused concern for Turkish buyers of polyethylene (PE) and polypropylene (PP), particularly amongst smaller consumers, market sources said on Wednesday.
The lira has dropped to 2.17 lira to the US dollar this week, compared to 2.02 lira to the US dollar on 10 December, as a result of ongoing political issues in the country ahead of a year of elections. Political tensions are having a negative impact on the economy, leading to an air of uncertainty amongst consumers of PE and PP-produced goods.
Speaking about the current market situation, one trader in Turkey said: “We have had some political problems here, so the effect is the Turkish lira lost 10% of value against the US dollar, so this puts a lid on everything. Everyone is holding and waiting to see what happens with the lira, so business-wise it's very dry right now.”
The trader added that small businesses in Turkey are feeling the pressure more than larger companies, as they are struggling to pass on increases in the raw material costs of high density polyethylene (HDPE) pipe and film grades to end-use consumers.
“In the past they [producers of end-user goods] used to like the price increases because they were able to put increases in their final products, but now they are saying they can't sell,” the trader said.
A Middle East producer commented that the slide in the exchange rate is pressuring converters in Turkey.
“They are buying in US dollars and converting to lira which might place them in a sensitive position,” the producer said.
“Demand [in Turkey] is at a reasonable level but the problem is the exchange rate, the increasing US dollar,” a local producer said.
Larger consumers in Turkey so far appear to be less affected by the drop, but remain cautious about how long the dip may last.
“[We have not experienced] too much impact yet but it's difficult to foresee,” a buyer of copolymer and homopolymer PP said.
“It depends on the political stability in Turkey. There is a tension in the markets, and the most important time is the time around local elections on 13 March. This year will be a difficult year,” the buyer said, adding that it does not expect to see much growth in the market in 2014.
PE and PP demand is still picking up after the traditional slowdown over the winter holiday period, and current supply is able to meet demand levels, but some players have concerns over first-quarter availability.
“It is very big hurdle for everyone here, especially for importers. But, it is [a] fact, and definitely affecting the importers importing more product,” a trader of Middle East product based in Istanbul said.
Iranian material is said to be tight, though sources were not certain of the reasons behind this. Bad weather in Iran was blamed by one source, whilst a possible shortage in domestic gas availability in Iran was suggested by a second.
Middle Eastern producers are also directing product to Asia, and in particular China, where the netback opportunities are better than in Turkey. PP offers from the Middle East are scarce, and are only for end-of-January loading, a Turkish trader said.
Offers from Europe were few this week because of many participants being absent from the market due to the Christmas and New Year holidays.
Increases in import duty from some countries effective from 1 January could also cause some change to material flows into the country. Turkish market participants will continue to watch the political developments closely whilst monitoring domestic stock levels.
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