Turkey PE, PP markets braced for substantial Aug price drops

Focus article by Matt Tudball

LONDON (ICIS)–Players in the Turkish polypropylene (PP) and polyethylene (PE) markets are expecting further, possibly quite substantial price drops in August because of weak demand and improved supply, sources said on Thursday.

Turkey’s local producer, Petkim, announced price drops for PP, low density polyethylene (LDPE) and high density polyethylene (HDPE) on Wednesday because of the downtrend in global prices and weak Turkish demand.

Falling prices in Asia and the Middle East, as well as expectations of possible three-digit reductions in the European August ethylene and propylene contracts are adding to the bearishness in the Turkish market, which experienced one of its slowest Ramadan periods in recent years this year.

(Turkish PP raffia and LDPE CFR (cost and freight) prices vs. Chinese raffia and LDPE film CFR prices)

Traders in Turkey have been testing the market to get an idea of what prices producers are willing to offer, and more importantly, how low producers will drop their offers in order to secure firm bids after the Eid al-Fitr holiday.

“All the traders are just asking, they want to learn what’s going on in the market. But that’s it, just checking,” a Turkish trader said.

The trader said it expects a possible price crash in the coming weeks because of new offers coming from regions such as South Korea and Europe, and because demand is weak despite some buyers having limited stock levels.

South Korean linear low density polyethylene (LLDPE) C8 grade was offered at $1,450/tonne CFR Turkey, subject to 0% import duty. European low density polyethylene was offered at €1,350/tonne CFR Turkey, also subject to 0% import duty.

A producer in Turkey said it expects further price drops next week because of both weak demand, but also because of improved availability, which the producer said was the more important factor.

With the European market entering the traditional summer holiday lull period in August, producers supplying Europe will be looking to offload excess cargoes to other regions, including Turkey.

However, not everyone is predicting lower prices, at least not in the immediate future.

“Demand in Turkey has become so high within a few days after Eid in so far as I have received [many] inquiries from my own regular customers,” an Iranian PP producer said, adding: “material availability in… warehouses has reached an alarming level and most [customers] have shown a huge buying appetite these days after Eid.”

The producer did not expect to see prices decrease this week as the market is just returning from the Eid holiday. Many companies in the Middle East only started work on Wednesday, leaving only two days of trade before the weekend. Therefore many Middle East producers are not expected to make August offers until next week.

However, other sources in Turkey said prices for Iranian material were being heard at $1,130-1,140/tonne FCA (free carrier) Iran. One trader said transportation from Iran to Istanbul could be arranged for around $60/tonne currently. More and more buyers in Turkey are now arranging their own transportation of material out of Iran in order to cut costs.

And while a second PP trader in Turkey agreed that the market may well be stable this week due to a lack of activity, it does expect to see some substantial drops next month.

“General expectation is to see around $1,150/tonne CIF (cost, insurance, freight) Turkey or below this level. Buyers are monitoring the price level of China.”

All player in the Turkish market will no doubt be waiting for August prices from the Middle Eastern suppliers while keeping a close eye on Asian prices throughout next month.