Turkey PP, PE markets becoming less attractive for some producers

Focus article by Matt Tudball

LONDON (ICIS)–Producers of polypropylene (PP) and polyethylene (PE) may have to seek out alternative markets unless profitability in Turkey improves, they said this week.

An Iranian PE producer said that, although it has seen an increase in enquires for PE from Turkey during this week despite the attempted coup on 15 July, it was still looking to export materials to the Chinese market which is currently more profitable.

PP and PE prices in China have been increasing since late May (for HDPE film) and early June (for PP flat yarn (raffia) grades), while Turkish prices were mostly flat during the month because of the religious fasting month of Ramadan.

While prices did increase in Turkey last week following the end of Eid al-Fitr, the coup attempt dampened buying sentiment this week, and divided Turkish market sources about which way prices would move from this point forward.

(Turkey CFR HDPE film & PP raffia vs China CFR HDPE film & PP flat yarn (raffia) prices)

A Middle Eastern producer of high density polyethylene (HDPE) said profitability for its product in Turkey is getting lower because of a number of factors, including on-going imports of cheaper Uzbekistani HDPE blow moulding and film grade, and was considering its options.

(Source: Turkstat)         

“After Uzbek materials [arrived], the market is dying. There is surplus materials and customers have options to secure their demand. Also… [buyers] have some materials from May and June,” the producer said.

“We see order books are bad with Turkey, some customers haven’t placed any orders for July. Turkey profitability is getting lower and lower,” it added.

The producer said the impact the coup attempt had on the lira has led to more uncertainty around price direction and demand, and is looking at alternative markets in order to sell volumes.

“We will not wait to see [how] the situation [develops] and may shift our allocation to other locations until Turkey has settled down,” it said.

As well as PE, an Iranian PP producer has stopped offering to Turkey this week because of increased domestic demand foremost, but also as a result of the uncertainty around the political and economic situation in Turkey.  

“This week we didn’t offer any products [to Turkey] due to… considerable increase in domestic demand, better netback we receive for domestic sales and uncertainty of Turkey’s political and economic situation.”

The absence of PP from Iran was noted by Turkish traders this week, with one saying it was surprised that the Iranian producer, who was offering tenders of up to 6,000 tonnes of PP to Turkey over recent weeks, had stopped offering this week.

If some producers do stop offering material to Turkey in coming months whatever the reason, if demand levels stay as they are then the market may be able to continue to function on the current import levels and should not tighten.

However, despite the weak demand and uncertain outlook, many sources both serving and within Turkey believe stock levels in the country are low, and buyers should, at some point, be taking increased volumes to replenish inventories, but currently this does not seem to be happening at the previously-expected rate.

For now, as in previous months, the market remains in ‘wait and see’ mode.