Turkey PP, PE market outlook uncertain, business reduced after coup attempt

Focus article by Matt Tudball

LONDON (ICIS)–The outlook for the Turkish polypropylene (PP) and polyethylene (PE) market remains uncertain as the government declares a state of emergency in the country, though small volumes of material are being traded as players try and adopt a ‘business as usual’ attitude, sources said on Thursday.

As early as Monday, sources in Turkey said they were getting enquiries from buyers for small quantities of material, and were also receiving offers from suppliers in Europe.

A small quantity of fibre grade PP was sold at €1,010/tonne CFR (cost and freight) Turkey on Tuesday, a trader said, while offers of raffia at €955/tonne CFR Turkey were also heard, it added.

On Thursday there were still enquiries from buyers and deals were being done, but the market mood was cautious.

“Things are getting back to normal but morale in the country and [among] businesses is very low and people don’t know what to do,” a second trader said on Thursday.

“We are working as normal now, there is some business but…people are buying very limited volumes,” the trader added.

Low density polyethylene (LDPE) prices from Saudi Arabia were heard at $1,170-1,180/tonne CFR this week, falling within the assessed range from last week.

There were some concerns among sources that buyers looking for material may struggle to pay for cargoes because of on-going liquidity issues seen before the coup attempt which have now been exacerbated.

Additionally, sources said buying confidence may be further negatively impacted by the drop in the lira against the US dollar, which fell to 3.09 on Wednesday, a new record low.

Prices heard from the market this week fell mostly within the previous week’s ranges, and it is not clear if prices will remain unchanged or if the weak demand and uncertain outlook will see values soften as sellers try to shift volumes.

An Iranian PE producer said despite the events of the weekend, it saw an increase in enquiries for material this week from traders in Turkey. The increase in request may be due to restocking, or buyers’ attempts to secure volume now in case the lira devaluates further in coming weeks.

However, it said buyers were reluctant to accept its higher offers, and wanted to buy at last week’s levels.

A PP producer in Iran also saw increased order requests from buyers in Turkey during the week but said deals were limited. It did say it had concluded some business at levels $10-15/tonne above CPT (carriage paid to) Turkey prices last week, however.

A second Iranian PP producer did not offer any material to Turkey this week because of uncertainty in the country, but also because it had seen a considerable increase in domestic demand in Iran.

The PE producer added that it has the option to export material to China if Turkish demand drops because the Chinese market is currently still more profitable than Turkey.

Other suppliers are also looking at alternative markets because of the uncertainty in Turkey, including a Middle Eastern PE producer.

“We… may shift our allocation to other locations until Turkey has settled down,” the producer said.

Earlier in the week, sources in Europe and Africa said they expect to see an increase in imports into those regions as a result of an expected drop in demand from Turkey.

“Turkey is one of the biggest export markets for PP for many producers from South Korea, the Middle East etc, and if something happens to that market… if there’s some uncertainty, people will be more cautious [and]… quantities have to go someone else when there’s a drop in demand,” a Dubai-based trader who serves the East African market said on Wednesday.

The outlook for Turkey is still unclear, and no one was really able to say how long the current situation, or at least the prevailing sense of uncertainty in Turkey, will continue.

In the meantime, sources believe the PP and PE markets will continue to function as normal but at reduced levels until both the political and economic situation in Turkey becomes clearer.  

Picture caption: People gather at Konak Square in Izmir to show support against the military coup attempt. Source: Depo Photos/Depo Photos via ZUMA Wire/REX/Shutterstock