Turkish PE, PP June prices ‘impossible to predict’

LONDON (ICIS)–Buyers in the Turkish polypropylene (PP) and polyethylene (PE) markets are pushing for reductions in June offers of up to $50/tonne for some grades because of weak demand, but producers remain bullish and the outlook for June is unclear, market sources said on Wednesday.

Prices in Turkey have been rising since February because of limited availability, but demand levels in the country remained poor because of the weak Turkish lira versus the US dollar, cash flow issues and a drop in exports of finished plastic goods.

“For June the feeling from buyers is that they are looking for a $50/tonne decrease and demand has already weakened significantly,” a Middle Eastern producer said. “We made several offers at the end of last week and there was almost no interest to purchase more material at May prices. So, expectations are for a decrease but it’s impossible to predict.”

Other producers remain more bullish in their June outlooks, with at least two Middle Eastern suppliers not expecting any downward movement next month due to reduced availability.

“The market in general [is] balanced. We do not expect softening during June, [but] maybe in July… availability in all polymers are still tight at least [from] our side due to production problems in the plant,” one of the two Middle Eastern producers said, speaking of its linear low density polyethylene (LLDPE) and high density polyethylene (HDPE) film.

The second producer said its current prices for HDPE non-spot material in May were above $1,500/tonne CFR (cost & freight) Turkey, but that it now limits itself to working with key customers and not spot because margins in Turkey’s spot markets are no longer attractive.

However, despite bullish outlooks from the supply side, there is still caution from buyers and traders that current demand in Turkey will not support any further price hikes.

Players will also be closely watching developments in the Asian markets ahead of June discussions, as prices in China drop amid weak demand and lower feedstocks, which could add to the already bearish buying sentiment in Turkey.

Talking of the wider Turkish PE market, including HDPE pipe grade, a trader said on Tuesday that the market is very slow. On the pipe market, the trader said there is no business from the traditional construction or agriculture sectors.

In the PP market, Iranian material was offered at $1,470/tonne CPT (carriage paid to) Turkey this week, up from $1,420/tonne CPT last week, but with no success. One European producer had even lowered its offers during the week because of a lack of buying interest, sources said.

The lira may have gained slightly on the US dollar in May, but it still remains at low levels and buyers and traders in Turkey continue to mention the negative impact the drop in the country’s currency is having on business.

The upcoming Turkish general election on 7 June as well, as the Islamic month of Ramadan starting on 18 June, could also have an impact on demand levels in the country, although players in the market have not necessarily stressed these two events as being of significant concern to traders in June.

The PP market, as well as suffering from the same internal issues as PE, has also been plagued by a drop in exports to key markets in the region, as well as to Europe, where the weak euro makes trading with Turkey less attractive.

“There are a lot of complaints from converters due to weak demand [for] their products,” a PP trader said.

In raffia in particular, producers may struggle to get any firm bids for higher June offers now that Indian material is being offered to buyers – albeit for July shipment, a trader said. Indian imports benefit from a lower 3% import duty rate compared to 6.5% import duty charged to Middle Eastern suppliers.

Additionally, regular supplies of Turkmenistan raffia has been available in Turkey, with about 7,000 tonnes per month being sent to the country, the trader said. Offer prices from Turkmenistan were heard at $1,400-1,420/tonne CPT Turkey at the end of last week, with 3% import duty applicable. However, offer prices on Tuesday were heard lower at $1,370-1,390/tonne CPT Turkey.

One Middle Eastern producer is offering raffia at $1,450/tonne FCA ex-bonded warehouse because of very limited availability, but buyers in Turkey now have other, cheaper options available to them which, together with softer prices in Asia, may put pressure on the Middle Eastern suppliers to lower their expectations for further increases in June.

Focus article by Matt Tudball