Flat Turkish PP demand not deterring bullish offers post-Eid

LONDON (ICIS)–Players in Turkey’s polypropylene (PP) market were ‘cautiously optimistic’ – the industry phrase used by many when they hope there is some improvement on the horizon – about demand in the second half of the month, as the country enters the Bayram holiday.

However, when the market returned from the Eid holidays this week, it seems that those cautious hopes of improvement in demand have not materialised.

PP stock levels in Turkey, according to almost all market participants asked, are extremely low. Producers were sure that converters and end users were running close to empty, and demand would pick up after the Eid holiday.

That does not appear to be the case according to traders this week, who said there were very few done deals in the market, and the amount of enquiries from buyers were also not at the levels they expected after the holiday.

“Done deals are very limited as there is no pickup in demand,” a Turkish trader said, adding: “It’s mainly [because of] financial uncertainties,” referring to the aftermath of the failed coup attempt on 15 July.

“The market is sounding very quiet, probably will stay like this for a while,” a second trader said, adding that buyers are likely waiting until October offers emerge, expected towards the end of next week.

However, producers were more bullish, with some seeing higher offer prices compared to the period before Eid, and with confirmation of higher offers from traders as well this week, price edged up despite limited buying interest.

CFR Turkey homopolymer raffia and fibre prices

It became clear that prices below $1,000/tonne CFR (cost and freight) and CPT (carriage paid to) from Middle Eastern and Indian producers, as well as Iranian producers were no longer in the market.

Firming feedstocks in Asia and Europe, as well as higher monthly PP prices in the European market were given as examples as to why Turkish offers were also moving up. Asian C3 prices have risen more than $100/tonne since the beginning of August, one Turkish trader pointed out, so PP prices in Turkey have to move, it said, though PP prices in Asia have not been moving in line with feedstocks.

CFR NE Asia propylene vs. CFR SE Asia flat yarn (raffia) prices

Amongst the producers there also appeared to be a little more optimism compared to traders, with one Indian producer saying that the enquiries it was receiving this week were translating into deals, rather than just customers calling around to test market price levels, as seen before Eid.

Giving further fuel to the bullish outlook from producer is the beginning of one of the peak carpet and textile production seasons, which should really get underway now the market has returned from Eid.

“The carpet season has very recently started and the inventory levels are not sufficient for this season,” an Iranian PP producer said.

This is where buyers may find themselves facing a problem in October, if inventory levels are as low as many believe them to be.

Producers have been looking at alternative markets ever since the economic uncertainty caused by the coup attempt in July. Iranian producers focus on their own markets as well as Asia and CIS countries. A major Middle Eastern producer had previously said it was sending reduced volumes to Turkey in the wake of the coup, and only to trusted, long-standing customers, implying there was little left for spot business.

With a 28% drop in homopolymer imports from June to July, it is clear that the coup attempt has had an impact on the import market, and if Turkish buyers wait too long to restock, they could find themselves with paying for limited cargoes at higher prices.

Next week should deliver a clearer picture of demand levels, as producers are expected to announce their October offers. At that time, it should become clear just how low stock levels are and how much product is available depending on what offer levels buyers are willing to accept.

Focus article by Matt Tudball