Focus article by Matt Tudball
“All of them [buyers] nearly are [still] in holiday mode, they don't want to move their fingers. After naphtha dropped, everybody is expecting huge price drops so that's why they stopped their purchases,” a trader of low density (LDPE) and linear low density polyethylene (LLDPE) said on Wednesday morning.
“Things have been slow and nothing major [has happened],” a Middle East LLDPE and high density polyethylene [HDPE] producer said, adding it has seen no change in the market since last week.
In addition to expectations of lower prices off the back of the naphtha drop, there is still an air of caution prevailing over the Turkish market because of ongoing cash flow problems.
Traders have been struggling to get payments from buyers because of credit issues and a lack of cash. With the lira still weak against the US dollar following political and economic issues in late 2013, many buyers are only partially paying for deliveries, or not at all in some cases.
Turkish banks are also reluctant to issue lines of credit to buyers too, sources said. This leads to buyers implementing a hand-to-mouth buying mentality, only purchasing the minimum amount of material they need to keep their manufacturing lines running.
There was also talk of increased imports from Europe this week because stable Turkish prices are becoming more attractive to European suppliers as prices in the European market ease.
In the PP market, producers, traders and buyers are seeing slow demand because of the European summer holidays.
“Things are very quiet… the main reason is August holidays in Europe and Turkey. Many exporting countries are slow because Europe is off, especially in BOPP,” a producer with facilities in the Middle East said.
The European market is one of the main export areas for biaxially oriented polypropylene (BOPP), and Turkish BOPP buyers have previously said demand for their finished goods is low because of the seasonal lull in Europe.
This could mean that PP demand in Turkey remains quiet until September when the European market returns from vacation.
Demand for raffia grade PP is also not strong, the producer said, as unrest in neighbouring Iraq has seen exports to one of Turkey’s main export markets drop considerably in recent months.
As a result, there is talk among traders of downward pressure on some homopolymer grades.
“Some Arabian producers have surplus quantities (especially PP homo injection and raffia) and considerably lower price levels are workable,” a trader said on Friday, adding: “$1,600tonne cost and freight (CFR) Turkey is the nominal offer level.”
However, Indian material is being offered at higher levels, with done deals heard at $1,670/tonne CFR Turkey for September delivery. Indian material is subject to 3% import duty, while Middle Eastern material is subject to 6.5% import duty as of 1 January 2014.
With a possible drop in prices from Middle Eastern producers and firmer numbers out of India, the raffia price range has the potential to see some widening in the Turkish market.