PP markets see reduced volatility in China, Turkey

Import PP prices in China and Turkey have seen reduced volatility in the past one year when compared to the previous years, according to ChemOrbis Price Index. After bottoming out in May 2013, PP prices made a quick recovery and China’s market has not seen any prices below US$1450/ton CFR since June 2013 while Turkey’s import raffia market has mostly traded above the US$1600/ton threshold on average in the same time span. However, PP prices in both countries were trading in a wider range and were subject to more fluctuations before 2013, as can be seen from the graph below. After the global economy suffered from a crisis in 2008, the markets started to recover gradually in the following years, which resulted in noticeable fluctuations in PP pricing. Between 2010 and 2012, the volatility was not as sharp as before but PP prices still traded within a US$200/ton range, as can been seen from the second graph below. With less volatile PP prices in the past ten months, some players believe that demand has not rebounded yet because prices have not seen a noticeable drop. Indeed, both countries have been suffering from unsatisfactory demand particularly after the start of 2014. There are wide speculations that China’s and Turkey’s economies will not be able to meet their growth targets this year. Unexpected falls in China’s imports, exports and manufacturing in March are also confirming the slower than expected demand in the PP market. The fluctuations in the local currencies have also been preventing buyers from making new purchases. All of these factors have pushed buyers to become increasingly more cautious about their financials. The state of demand has also urged global producers to control their supply for some time. Middle Eastern suppliers’ allocations to Turkey have been limited for a while now. China, meanwhile, has been suffering from oversupply of PP for the past three months, but has not seen a drastic drop in import PP prices due to reduced quotas to the country. According to ChemOrbis, the cautious stance both on the buyers’ and sellers’ side has resulted in a relatively steadier trend in the PP pricing. Another crucial reason behind the reduced volatility is the cost side. As can be seen from the graph below, crude oil prices have not posted significant changes in the past one year. Since the beginning of 2013, NYMEX crude traded mostly in the range of US$90-105/bbl unlike the previous years of 2010 and 2012, when prices occasionally saw the US$80/bbl threshold.