Turkey PE and PP players eye upcoming local elections as lira wobbles

LONDON (ICIS)–Nerves in the Turkish polyethylene (PE) and polypropylene (PP) are high ahead of Turkey’s local elections this weekend, with the lira already volatile this week.

The Turkish lira (TL) tumbled against the US dollar earlier this week, as relations between the two countries frayed further following the US’ move to recognise Israeli sovereignty over the disputed Golan Heights territory in the Levant.

The Turkish government has taken steps to prop up the lira by restricting trading on the offshore swap market and using its foreign currency reserves to prop up its value.

The currency has fallen from a high of TL5.33521 per US dollar on Tuesday to  TL5.65098 at the time of writing.

Recently-released central bank figures indicated that international currency reserves are dwindling, raising market fears that the government’s propping up of the lira may weaken after the elections.

“I think radical changes are waiting for us after Sunday” said a trader.

Local election fears are centred around the possibility of unrest following the votes, either because of the outcome undermining Turkish President Recep Tayyip Erdogan or if the results are disputed.

PE and PP prices were mostly stable this week as players stepped back from the market ahead of the elections.

Sentiment is firming and many players are expecting increased April offers. A collapse in the Lira could soon counter any bullishness from suppliers.

PE and PP prices were mostly stable this week as players stepped back from the market ahead of the elections.

Sentiment is firming and many players are expecting increased April offers. A collapse in the Lira could soon counter any bullishness from suppliers.

“[The lira is] not stable and affecting the trading business a lot” said a source.

The lack of ready materials, slowly improving demand and climbing upstream costs were providing a basis for rising prices over the past month. The deteriorating economic situation could turn sentiment across the market however.

Supply levels have suffered from a lack of Iranian imports (due to the Nowruz New Year holiday), productions issues in the Middle East and reduced allocations to Turkey.

“Not sufficient offers/products expected” said a source

These pressures should ease later in April, as Iranian material returns to market and some Middle East productions issues have ended.

Iranian volumes should start to ship from around 6 April.

Early April offers have been made by some Middle Eastern suppliers. For low-density polyethylene (LDPE) and linear low-density polyethylene (LLDPE), offers were increased from March.

PP supply levels are going to remain strained, at least in the early part of April.

Some Middle East suppliers have reduced their allocations to Turkey and Iran will not start delivering again until around 6 April, as most players remain on holiday following the new year celebrations.

There is also an indication that some buyers may resist price hikes due to the increasing price gap between raffia and fibre.

“Q2 is a strong seasonal production period but only if there is no financial turbulence” said a source.

Focus article by Ben Lake.

Pictured: Supporters of Turkish President Recep Tayyip Erdogan wave flags during an AK Party local election campaign rally in Istanbul, Turkey, 29 March 2019 (Source: Erdem Sahin/EPA-EFE/Shutterstock)