Turkey PE and PP prices slashed, demand slumps as coronavirus spreads

LONDON (ICIS)–Liquidity has reduced in the Turkish polyethylene (PE) and polypropylene (PP) market due to the effects of the coronavirus pandemic, but deals have been completed following aggressive reductions by some sellers.

Prices for all grades have fallen, as demand falls away and some suppliers have cut prices in an attempt to shift their product. Rapidly closing borders and the spread of country-wide lockdowns has spooked some sellers.

Sentiment is poor as the government begins to enforce measures to prevent the spread of the virus. Although the government is keen to avoid an official lockdown, many citizens are taking matters into their own hands and isolating as much as possible.

Public gatherings have been forbidden, schools shut down, communal prayer banned and many business forced to close.

The expected effect on demand means that some converters have reduced production capacity, while others have decided to cease production for around two weeks.

Many buyers expect April offers from Middle East suppliers to be a catalyst for big price drops and are holding their position until announcements are made.

Demand is poor for most grades, except high density polyethylene (HDPE) blow moulding, which may be seeing the benefit of demand for bottles for cleaning products. Biaxially oriented polypropylene (BOPP) is also experiencing a boost from sales of protective masks.

PP demand has taken a significant hit as many PP converters rely on the export market, which has been decimated by the spread of coronavirus.

Europe, a major export destination, was considered the centre of the virus’s spread across the world.

Supply levels are still poor but demand has fallen low enough for it to not matter, for the time being.

“Turkey’s main export market is Europe and many European buyers cancelled orders or they asked to defer the shipments,” said a seller.

A similar price trend has been seen in China, with some export sellers desperate to move their material before border closures or reduced logistics stifle the market.

A Turkish premium over Chinese prices leaves most sellers preferring to offer to China, due to better netbacks. Currently, despite the latest discounts, Turkish prices still hold a significant premium over Chinese prices, as can be seen in the graph below.

The uncertainty over logistics, demand and access to countries may upend the established expectations but for now most buyers will be expecting the Turkish price trend to follow that in China.

Ready material is still able to be sold for a premium, as players look for the quickest access to volumes.

Focus article by Ben Lake