OUTLOOK ’18: Turkey polymers players hope for better times but face challenges

LONDON (ICIS)–Turkish polymer players endured a turbulent 2017, as multiple economic and political issues have diminished business levels and the future remains opaque.

Both end users and converters responded by limiting order levels and resisting price increases. Many players have suggested that this has been one of the most difficult trading years in Turkey in their experience.

There have been some expectation that the market has to improve, as it would be difficult for it to deteriorate further.

The imminent arrival of polyethylene (PE) from expanded US and Indian capacities next year is expected to leave Turkey a buyers’ market.

US material is expected to be marketed aggressively as American sellers look to carve out share in new markets and competition could become fierce, as the traditional sellers will have to compete on price.

Many major suppliers have cut their allocations into Turkey, as other looked to more profitable regions or suffered production disruptions.

Despite this, prices remained low and it was suggested that Middle East volumes were primarily being offered to maintain market share.

Polypropylene (PP) has been more resistant to a weak market as supply and demand have remained more balanced. However, there have still been long periods of stagnant prices.

As there is only one moderate expansion to PP production currently planned, at the OpAl Dahej plant in India, PP is anticipated remain balanced to tight in 2018.

Oversupply has rarely been an issue this year and if the plastics continues to grow then periods of tightness could become increasingly regular.

What is more difficult to predict is the political outlook for Turkey, after much of the weakness in 2017 can be attributed to politics and its effects on the economy.

There is not any singular planned event, such as this year’s referendum, that paralysed the market, currently planned in 2018.

There are a variety of potential issues, however.

Turkey could see a cut to its €4bn accession funds as European leaders look to counter President Recep Tayyip Erdogan’s increasingly authoritarian grip on power.

This equates to €600-700m a year up to 2020.

The Turkish economy is already suffering as a result of political disputes with the US and problems associated with the Kurdish referendum, and reduced investment on infrastructure could further weaken the country.

A general election is planned for the end of 2019 but there is a possibility that President Erdogan will move it forward in time, allowing him to capitalise before public opinion turns against his rule in a period of deteriorating economy and high unemployment rate.

The main opposition parties are also in poor states following the 2015 coup attempt.

Uncertainty preceding an election could undermine confidence in the economy, similar to the effects of the constitutional referendum.

Prices will likely be pushed upwards in the first quarter and this trend has already begun.

Following months of low price levels, producers stood firm on December offers and were bullish for January, as they have plenty of more profitable export opportunities across the world and stock levels in Turkey are becoming strained.

Despite all these difficulties and potential problems, some sources remain optimistic about Turkey’s polymer market, claiming that, despite difficulties in maintaining prices, they observed a growing market that will remain attractive to a variety of sellers.