China continues to exert pressure on Turkey’s PP, PE markets

10-Jun-15

Import PP and PE prices have been steadily moving down for almost a month in China, according to ChemOrbis. This factor is exerting downward pressure on Turkey based on netback calculations, although Mid-Eastern suppliers are not rushing to lower their offers to the country with support from their limited availability and record high prices in Europe. Turkey’s import PP and PE markets have retreated somewhat since early June for various origins despite initial targets of rollovers. Nevertheless, players still think that the market has more room to come given the lack of demand and the record-high dollar/lira parity contributing to the downward pressure from China. “When taking the recent import PP prices in China into account, Indian and Middle Eastern origins should theoretically be US$50-60/ton below the current offers in Turkey. While we are already working with less than 50% capacity in the midst of lackluster orders from end product markets, there is no need for a rush to secure cargoes,” said several PP buyers. Many PP buyers also report holding sufficient stocks to last until the end of Ramadan, which will be followed by summer holidays. “Given the current political instability and thin orders, we are not planning to replenish stocks in the near term,” said a carpet maker. In the case of PE, the downward pressure on HDPEkim and LLDPE film is more evident based on the netback to China. “There is a premium of more than US$100/ton on the current offer levels in Turkey,” said a packaging buyer. As can be seen from the graph below, current import PE prices in Turkey are carrying a larger than normal premium relative to China. “However, a major Saudi supplier, who rolled over its June prices, is still not willing to concede to any discounts for this month given its tight availability. They told us that their June orders have already been booked,” added the buyer. The tightness concerns that have been in place for more than four months in Europe, which pushed spot PE prices to record highs in that region, have helped to curb the downward pressure exerted by China on Turkey, according to ChemOrbis. Yet, sources from other Middle Eastern PE producers admitted facing resistance from buyers, arguing that the downward pressure on the market will make itself felt on prices for July shipments.