PP, PE uncertainty prevails at Turkey’s Plast Eurasia fair

(recasts, clarifying timeframe in third paragraph)

Focus article by Matt Tudball

ISTANBUL (ICIS)–Turkish polypropylene (PP) and polyethylene (PE) players said the outlook for the Turkish polymers market was still not clear as attendees gathered at the 25th annual Plast Eurasia event, which was held from 3-6 December in Istanbul.

With over 43,000 visitors expected, there was no better place to try and gauge the mood of the Turkish PP and PE market, which has been suffering throughout most of 2015 because of a weakening local currency, lack of demand, particularly for finished goods of PP, and political and economic uncertainty.

However, when questioned as to when the Turkish market may see some form of a rebound, players were almost unanimously saying by the end of the first quarter 2016 or early second quarter. Though they were quick to stress exactly what level of improvement there will be waits to be seen.

“[Looking at 2016] we have to be optimistic but in reality we have issues; geo-political and cash issues, and not just in Turkey,” a distributor said on the side-lines of the event. 

Taking a view on the wider problems facing Turkey, one trader pointed to too much uncertainty caused by factors outside the Turkish market.

“Demand [in Turkey] is low. There is too much uncertainty [with the] US exchange rate and Chinese demand is low,” it said.

Turkey often looks to the Chinese market for signs of price direction, and prices in Asia have been falling due to weak demand in that region, and these price drops have been reflected in the Turkish market in recent weeks.

Some had more extreme opinions on Turkey right now, with a second trader saying the market has never been so bad. “This is a big crisis,” the trader said, adding the main problems are political and economic, and payment and collection from customers.

Looking at the PP market in particular, the main manufacturing hub for PP finished goods in Gaziantep has seen substantial drops in production in 2015, with a second distributor estimating some factories in the city are running at 30% of total capacity due to a lack of demand from key export markets.

“In January we expect more price drops as there is no demand in Turkey,” the distributor said, adding: “[it will be] 2-3 months until [the market] improves.”

Several sources at the event gave the beginning of the second quarter 2016 as a time that the Turkish market may see some sort of turnaround, or at least a return to some semblance of stability in terms of the country’s economy. 

With the election of the Justice and Development Party (AKP) back in to power on 1 November, and regardless of their personal views of the government, market participants feel this may give Turkey a chance to stabilise its economy and get the lira back on track following record lows against the US dollar in September.

However, political tension with Russia, together with the loss of the Iraqi and Syrian export markets could still keep demand low as Turkey relies heavily on exports of finished goods to these regions. Some sources at the event said any trade issues with Russia may be resolved in the shorter rather than longer term, perhaps by the middle of 2016. Regardless, this will most likely have some form of impact on Turkish PP and PE demand in the immediate future.

For now, the market will likely concentrate on keeping year-end stock levels low before focusing on re-stocking in 2016, while hoping the predictions of market improvement in quarter two become a much-needed reality.