Price and market trends: Turkish PE buying activity increasing amid limited supply

24 July 2014 16:38 Source:ICIS Chemical Business

Buying activity in the Turkish polyethylene (PE) market has increased because of firming prices and limited availability, sources said on 16 July.

“The market is very, very hot,” one trader said, comparing conditions to the weather in Istanbul that week.

“Suddenly people decided to buy and there is no supply,” the trader said, adding that buyers and converters in Turkey, especially smaller and medium-sized businesses, had not been buying for weeks in the hope that prices may come off, or that their inventories would be sufficient to meet consumer demand.

 

 
However, the Turkish PE market is tight because of limited imports from Europe and Iran, and bonded warehouse stock levels in the country considerably reduced.

“[There] is a little bit of panic enquiries. Everybody is trying not to be caught in the trap if there are no materials, otherwise demand is not OK in general,” a second trader said, adding: “Nobody is pleased with the situation”.

Some in the market said troubles in neighbouring countries such as Iraq has had an impact on Turkish demand due to diminishing exports across Turkey’s border, but not at a significant level.

But the market has not slipped into chaos, the trader was quick to confirm, and the enquiries it was receiving were for smaller quantities as buyers looked to cover their positions in the near term.

In the low density polyethylene (LDPE) market, the upcoming 105 day turnaround that Petkim’s Aliaga facility, Turkey’s sole domestic LDPE, high density polyethylene (HDPE) and polypropylene (PP), on 21 July may also be causing some concern among LDPE buyers.

Petkim serves approximately half of Turkey’s LDPE needs, and even though the company has assured customers it will meet supply needs, some buyers are being cautious and building stock, despite the company raising LDPE and HDPE prices on 15 July by $35-40/tonne for the second consecutive week.

“Petkim... said there will be no problem to supply to the contracted customers [during the shutdown]. It seems they will have enough material but the prices level would be high,” a buyer said.

“We hope they [Petkim] will supply us continuously during shutdown, but against an unpredictable delay we have to take action,” a second buyer said when asked about continuity of supply during the downtime.

While some consumers take a position to cover supply, others are watching upstream costs and may be waiting before buying in the hope that some price relief may emerge and they will be able to buy at lower prices. “Prices have reached a five year high, making converters reluctant to take a position. Feedstocks, especially crude, have dropped so [buyers] are a bit nervous,” a Middle Eastern producer said.

It is unlikely that prices will come off before next month, however, as many in the market expect demand to increase in August when manufacturing activity in Turkey picks up at the end of Ramadan. In addition, firming prices in Asia continue to attract Middle Eastern interest, and producers send cargo to China because of better netback opportunities, further limiting supply to Turkey.

With no sign of additional imports or a slowdown in demand in August, Turkish buyers, may have to wait some time before seeing any relief in the PE market.

By Matt Tudball