Turkey PE, PP buyers face ‘psychological’ battle over lira fluctuation

12 February 2014 12:06 Source:ICIS News

Polyethylene is used in food packagingLONDON (ICIS)--Buyers of Turkish polypropylene (PP) and polyethylene (PE) spot cargoes are facing a ‘psychological battle’ against the uncertainty caused by the Turkish lira fluctuations seen in January and February as their stocks start to run low, sources said on Wednesday.

Buyers in end-use markets, such as large bags which use PE, and carpets which use PP, want to buy materials, but the constant shift in the strength of the lira against the US dollar is causing them to hesitate and try to predict where the currency movement will go next. During this time, their stock levels are running low, resulting in more prompt purchases, often at higher prices.

A trader in Turkey summed up the situation: “The main problem [faced by buyers] is psychological. The business brain is mixed up, [buyers] prefer to wait, but don't know what they are waiting for.”

The Turkish lira reached record lows against the US dollar in January, forcing an extraordinary meeting of the Turkish Central Bank in January, resulting in a hike in interest rates. But this is only a short-term fix, according to one Middle Eastern producer of HDPE film.

“The Turkey market is in a special situation, and the currency is playing a big part. There is demand and they [buyers] would love to buy but are just waiting for the right moment to buy,” the producer said.

Buyers are also hoping that delaying making purchases will push suppliers and traders to lower prices. Bids from buyers for low density polyethylene (LDPE) were heard at $1,550/tonne CFR Turkey, whilst offers were said to be as high as $1,610/tonne CFR Turkey from some suppliers.

However, demand from contract customers is looking stable-to-firm, according to a Middle East PP producer.

“Demand is very huge, especially for non-woven and bulked continuous filament (BCF) fibre,” it said.

“People are waiting for China to see how the China market reacts [after the Lunar New Year holiday]. [Chinese] prices are strong so [we] will not decrease prices [in Turkey],” the producer added, referring to its fibre and raffia PP grades.

By Matt Tudball