Turkish PP prices under pressure from Egyptian imports

Matt Tudball

13-Jan-2015

Focus article by Matt Tudball

LONDON (ICIS) – Turkish polypropylene (PP)  raffia and fibre prices are facing further downward pressure from increasingly cheap Egyptian material entering the country in large volumes, exacerbated by falling Brent crude oil prices, sources said in Tuesday.

Duty free Egyptian raffia and fibre is being offered at $1,000/tonne DAP (delivery at place) Turkey this week, equivalent to $935/tonne CFR Turkey, which is subject to 6.5% import duty. In addition, crude oil prices slipped to $45/bbl Tuesday morning which will have a negative impact on Turkish buying sentiment.

Last week, Egyptian offers were $100/tonne higher at $1,100/tonne DAP for both grades.

“Egypt seems to becoming the market maker [in Turkey]. [Egyptian suppliers are offering ] huge volumes, each time they’re offering 7-8,000 tonnes,” a Turkish trader said.

“[Egypt has] the advantage of duty free, being very close and having the cheapest price. Egyptians are regular supplier for the Turkish market, and now with Europe slowing down, [Turkey is becoming] their main market,” the trader added.

With an average delivery time of 2-3 days,  Egyptian material is popular among the hand-to-mouth purchasing behaviour of Turkish buyers, supplanting bonded warehouse material in some cases.

Other producers supplying Turkey have reacted to the lower Egyptian offers, with several dropping their offer prices in order to try and compete.

“Turkey has become a dumping market for all suppliers, unlike Europe,” a major Middle Eastern supplier said, adding: “The market is big, and very sensitive. Iran is there, South Korea, Egyptian material is there.”

The producer said prices for raffia were around the mid-to-high $1,000s/tonne CFR for raffia, and fibre would be $20/tonne higher, but due to the pressure being felt on fibre prices in particular, the producer may see raffia and fibre prices align.

Because of the low offers from Egypt, Turkish buyers have now taken an even more pronounced bearish attitude to pricing bids than in previous months, pressuring producers for continuously lower offers.

“Our customers are talking about lower prices,” a major Iranian PP producer said, adding sentiment in Turkey is very negative, and despite many negotiations that are ongoing with its buyers, securing a deal is taking much longer.

Additionally, buyers now want to have price discussions only after the material has arrived in Turkey, either over the border from Iran for CPT (carriage paid to) cargoes, or once CFR (cost and freight) shipped cargoes have arrived in the Turkish ports.

“One problem is expectation in Turkey [is very low],” the Iranian producer said.

“Just today we heard a sharp reduction in oil prices. It’s a very sharp decrease, and it will [have] much more [effect on] the Turkish market” the producer added.

With such low oil prices, Turkish buyers will be even more inclined to limit purchases, especially as end-use consumption and demand remains weak in Turkey right now.

“What  I have heard is even the end users, they have reduced the production too because of the unstable situation of the exporting market [for finished goods]. They are producing at a very low level,” the producer said.

The Turkish PP market continues to wait for an indication of when oil and PP prices will reach the bottom, as well as improvement in export markets such as Iraq and Russia, all of which have seen demand for exports of Turkey-produced finished goods drop significantly in 2014 due to regional conflict in Iraq and EU-imposed sanctions on Russia.

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