Turkish Polyolefins Confront Tight Credit, China Uncertainty

Business, China, Economics, Europe, Polyolefins

istanbul_2.jpg

Source of picture: www.turkeytravel.com

 

By John Richardson

THE economic crisis continues to force the global chemicals industry to think on its feet due to, among many other things, persistently tight credit in some regions.

China has also become even more of an important market with every rumour and counter-rumour about levels of demand there influencing sentiment throughout the world – including, as we’ll talk about in a moment, Turkey.

This almost obsessive focus on in China is a reflection, I think, of weak growth fundamentals in the US and Western Europe. The flawed hope remains that China and other emerging markets can return the chemicals industry to the same level of health it enjoyed in 2003-07 without a developed world recovery.

“Banks in Turkey are less willing to lend to the basic plastics business because of the experience of Q4 2008 when prices collapsed and many producers were left with large inventory losses,” said a Turkish polyolefin trader who I spoke to earlier this week.

“The good news is that because our mortgage sector is less developed than in some other places, our banks are not burdened with large debt.

“But they are still cautious and this caution means that as a trader, you have to marshal credit very carefully and, wherever possible, help your customers. The distributors we deal with are now keeping around 5-10% of their annual revenues as stocks compared with 10-15% before the crisis.”

The oversupplied container-shipping industry has also rationalised vessel availability, resulting in a steep rise in freight costs from Asia to Turkey, he added.

“This has forced us to look elsewhere for supplies and so now we are sourcing more from Turkmenistan and Bulgaria.”

Ten years ago if you had asked anyone in the Turkish chemicals industry about the state of demand in China, you might have been asked why on earth you thought this was relevant.

But in the same interview, the Turkish trader gave me a full run-down of post Chinese New Year demand conditions in China, thanks to his discussions that same day with contacts in Shanghai and Beijing.

Given what he agrees are weak long-term fundamentals in Western Europe, he is as anxious as anyone over whether recent polyethylene (PE) and polypropylene (PP) price declines in China will persist.

He forecasts that overall polymer demand-growth in Turkey, which averaged 17% per annum in 2001-07, will return to double-digit levels by 2011. Growth was minus 6% in 2008 and only 3% positive last year.

But is it realistic to expect this to happen without a recovery in the developed world which seems unlikey to occur until after next year?

PREVIOUS POST

What's next for Reliance?

09/03/2010

Source of picture: www.turkeytravel.com   By John Richardson THE economic c...

Learn more
NEXT POST

Refinery closures - how many and how fast?

11/03/2010

Source of picture: www.turkeytravel.com   By John Richardson THE economic c...

Learn more
More posts
China full-year lending decline confirms that Fed pause is a sideshow
15/01/2019

By John Richardson CHINA’S full-year 2018 lending figures are out and they underline what I’d be...

Read
Oil prices to be buoyed by new shipping fuel rules, despite economic slowdown
13/01/2019

Guest blogger today is Ajay Parmar. He is a chemical engineering professional with 5 years of indust...

Read
Turkey PE demand could be 8% lower as economic problems continue
11/01/2019

By John Richardson TURKEY’S apparent demand for PE may have fallen by 8% in 2018 to around 2m ...

Read
Flood of US LLDPE begins to disrupt markets with worse to follow
09/01/2019

By John Richardson THE ABOVE table illustrates the 2018 impact on smaller LLDPE markets of the arriv...

Read
US/China trade deal in March would likely quickly unravel
07/01/2019

By John Richardson YOU CAN bet on a rally in equity markets and in oil prices if some kind of deal i...

Read
China slowdown: After Apple, next wake-up call will be from auto markets
04/01/2019

By John Richardson THE NEXT big wake-up fall for global financial markets and the chemicals industry...

Read
The world in 2019: Social unrest, populist politics, trade barriers and global recession
02/01/2019

By John Richardson I PREDICTED in 2011 that the world would by a decade later be less globalised as ...

Read
Nothing the Fed can do to stop China causing a global recession
20/12/2018

By John Richardson US stock markets yesterday demonstrated their worst negative reaction to a US Fed...

Read

Market Intelligence

ICIS provides market intelligence that help businesses in the energy, petrochemical and fertilizer industries.

Learn more

Analytics

Across the globe, ICIS consultants provide detailed analysis and forecasting for the petrochemical, energy and fertilizer markets.

Learn more

Specialist Services

Find out more about how our specialist consulting services, events, conferences and training courses can help your teams.

Learn more

ICIS Insight

From our news service to our thought-leadership content, ICIS experts bring you the latest news and insight, when you need it.

Learn more