Turkish PE producers not relenting on prices

12 August 2014 15:30 Source:ICIS News

Focus article by Matt Tudball.

LONDON (ICIS)--Producers in the Turkish polyethylene (PE) market are keeping prices firm into August, particularly for low density polyethylene (PE), because of availability issues, even though demand appears more balanced than strong, sources said on Tuesday.

Producers were keen to push for higher August prices after Ramadan and the Eid ul-Fitr holiday at the end of July, during which demand was flat and prices stable.

In the low density polyethylene (LDPE) market, Turkish producer Petkim has entered a 105 day planned shutdown and expansion project for its ethylene cracker at Aliaga, and LDPE prices have been firming on concerns over availability despite the fatt that the the company has said previously LDPE production will not be impacted by the expansion.

“Because of Petkim, there is a shortage for LDPE, I think the sellers [will] keep increasing the prices until Petkim will start up,” a buyer said.

Offer levels from Middle Eastern producers were higher at the end of last week, at $1,660-1,680/tonne CFT Turkey, with done deals said to be in the region of $1,640-1,655/tonne CFR Turkey, according to a Turkish trader.

“LDPE is stronger than the other PE's, main reason being uncertainty over LDPE supplies from Petkim. Though Petkim informed otherwise, Petkim's availability [thought to be] less [than claimed]... this created [a] pick up [in] demand,” the trader said on Friday.

However, some in the market see stable-to-soft demand levels keeping the market more balanced.

“The demand is very low for all grades,” the LDPE buyer said.

“LDPE is short in the market as Petkim is producing at very small levels,” a second Turkish trader said, adding: “there were elections on Sunday, there were holidays [in July], so now demand is short. Because demand is short [the market is] balanced.”

Despite the outage, demand for LDPE, as well as linear low density (LLDPE) and high density polyethylene (HDPE) has not yet taken off in August as expected.

Even though buyers and traders talk of flat demand, producers do not seem willing to offer lower prices just yet.

“I pushed some producers to lower the price, but I am afraid they did not want to talk [of] decreases yet,” a buyer of LDPE and LLDPE said.

Sources said LLDPE cargoes were scarce, with limited material coming across the border from Iran. Possible production issues at two of the main Iranian LLDPE facilities as well as better netback opportunities to Asia could be the reason for less Iranian product entering the Turkish market.

“Iran - lately I don’t hear so much,"  a producer with facilities in the Middle East said. "[I]…don't think there are enough material coming to Turkey. Now prices in Asia are picking up so Iran is sending materials to China.”

The producer also saw HDPE film tighten this week, keeping its prices unchanged even though demand levels were not rising.

“HDPE is short, not enough supply. $1,680-1,690/tonne ex-bonded warehouse are workable levels,” the producer said, adding that it sees the HDPE market as balanced.

Some in the market also pointed to the presidential elections that took place in Turkey on Sunday as causing a drop in buying activity this week, and said demand may increase in the second half of the month.

Not all were convinced, with one trader not expecting any improvements in demand until September because of the ongoing cash flow issues in the country. A weaker lira against the US dollar means shipments from Iran and the Middle East, priced in dollars, become more expensive, and some buyers are defaulting on their payments to traders.

How long this will carry on for is unknown, but it is certainly adding a note of caution to the buying activities in the Turkish market in August.

By Matt Tudball