Turkish PP market more balanced on reduced supply

11 March 2014 15:36 Source:ICIS News

LONDON (ICIS)--The Turkish polypropylene (PP) market is more balanced as producers have reduced supply amid ongoing weak demand, market sources said on Tuesday.

“[The Turkish PP market] is more balanced at the moment,” a large supplier of raffia said.

“The supply side not very high, [and we] don't see very high inventory [levels],” the supplier added.

Demand has been weak for most of 2014, and buyers in Turkey have been scared away from making large purchases because of the substantial drop in the lira against the US dollar in 2014, which has seen buyers adopt a hand-to-mouth purchasing attitude.

Several manufacturers using PP to make finished goods in the production hub of Gaziantep have been running at 50% of production because there has been little demand from the Turkish consumer market for finished goods, such as carpets and sacks, used for coal among other things.

Players in the market expect that inventory levels are low because many Turkish PP consumers have been utilising existing stock levels to meet production needs rather than buy new cargoes.

When end-use production demand has required additional material, buyers have preferred to take prompt cargoes from bonded warehouses to meet their needs.

Producers are said to have reacted to this new buying behaviour by reducing run rates.

“It looks like demand is not strong, on the other hand, producers reduced production capacity, so [there is] not too much product on the field,” a Turkish PP trader said.

Some suppliers have been focusing on their contracted volumes during the month.

“[We are] operating at the same rates as previous months, [and we] are able to meet contract  needs,” a Middle Eastern supplier said, adding: “supply is not high, it's balanced.”

Iranian material is short in Turkey, with more cargoes said to be going to China, even though Chinese PP prices have dropped in recent weeks. However, the netback opportunities for Iranian suppliers in China are still more attractive than in Turkey, according to market sources in Turkey.

“Iranian [material] is over in China. [Iranian suppliers] get the money straight away. Chinese [customers] pay within 30 days, a better netback by $60,” the Middle Eastern supplier said.

In addition, Iran will soon enter the Nowruz holiday period, which will further limit PP supply into Turkey.

“If there is a holiday, shipments are not happening, and [there will be] delays on booked shipments,” the second producer said.

Despite the balanced nature of the market, it is still not clear when Turkish demand levels will improve. Some believe there may be an increase in demand following local elections in the country on 30 March, but until then, demand remains flat.

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By Matt Tudball