Saturated Turkish PE market could face influx of Iranian volumes

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LONDON (ICIS)–Turkish polyethylene (PE) prices have fallen this week amid weak sentiment and oversupply while sources have become worried that even more material could end up in Turkey.

Iranian sellers are encountering difficulties in securing sales in China, which is one of their largest markets, according to sources.

“Chinese banks are not willing to open letters of credit or finance Iranian materials anymore,” said a trader.

“They were bypassing it previously via UAE banks; however, lately there has been more restrictions.”

One source said that there has been a 40% decrease in deliveries from Iran to China, although sources were unsure exactly why authorities would try to curb deliveries from Iran.

There was some speculation that it is politically motivated, but this is difficult to substantiate.  

“It is like a hidden sanction,” said a source.

A source reported that an Iranian vessel containing 40,000 tonnes of plastics, headed to China, has recently been diverted to Malaysia to avoid potential selling problems.

With one of its major buyers cut off, most players expect Iran exporters to turn its attention to Turkey.

With the market already saturated with product, some sellers are worried that oversupply will affect prices over the coming weeks.

“Chinese buyers are not buying Iranian material. It is putting pressure on Turkey… Trying to offload to Turkey but demand is not that good,” said a trader.

Turkey is already an attractive arbitrage prospect for many exporters, with the country currently inundated by PE sellers leading to fierce price competition.

Product from Korean traders, Uzbekistan, Russia and Europe is currently competing for the attention of buyers.

“Turkey is usually a dumping ground, if it can’t find a home, it will end up in Turkey,” said a production source.

Buyers are aware of this competition and are still eyeing Asian prices, which continue to tumble.

Rather than invest now, most are happy to live hand to mouth and wait for prices to drop further.

 The upcoming Ramadan festival is likely to damage demand further and many sellers are eager to shift stock before it begins on 26 May.

With supply weak and not likely to improve in the coming weeks, there is possibility that most of this material could end struggling to sell in Turkey.

Blow moulding high-density PE grade is currently already flooding markets worldwide, according to sources, which has forced other high-density grades to lower prices to compete.

Large deliveries from Iran would likely cover all forms of PE, softening sentiment across the market further.

One source said it believed that these issues would be resolved in a few weeks but most players were uncertain of timeframe, with the motive of the authorities being difficult to comprehend.

These events will likely have a direct impact on the Turkish market and possibly beyond, especially if Turkish demand cannot cater for the volume surplus.

Pictured: Air view of Turkey’s city of Antalya, with ‘polytunnels’ at the foreground. PE is widely used in agriculture. Source: WestEnd61/REX/Shutterstock

Focus article by Ben Lake