Rising parity hinders activity in Turkey’s polymer markets

12-Jun-13

Since last week, the number of players in Turkey who are talking about the impact of the recently appreciated dollar against the local currency has risen as the activity has been hampered in the polymer markets, where manufacturers buy their raw materials in US dollar but sell their end products in Turkish lira, as per ChemOrbis. The US dollar moved above 1.9 against the Turkish lira before moving down to trade at highs of 1.8 at the moment. According to media reports, the dollar has gained 6% in a month’s time. “There is no way we can work in a profitable way. Our raw material costs have risen since May while we are making a loss in our end products since we sell in Turkish lira,” said a packaging converter who regularly buys from a Middle Eastern producer. A sack manufacturer raised similar concerns, saying “Our end demand is still not as high as it was in the same period of the last years. In order for us to secure PP cargoes in large tonnages, we should have the orders of at least two months ahead. As we don’t receive such long term orders, we prefer to buy our end product requirements on a needs only basis.” A PS converter in the packaging field said, “We are not able to reflect our rising costs to our end product prices. On top of this, the US dollar has registered a steep appreciation, which puts us in a very difficult situation.” Sellers also affirm that there is a noticeable slowdown in market activity since last week, which they partly attribute to this parity issue. According to market talk, Petkim has also delayed its announcement for a new price hike this week due to this problem. While the US dollar has appreciated against the Turkish lira, it has been losing ground against the euro since last week. The euro/dollar parity is now above 1.32, which also hurts buying interest for euro based offers. A trader who offers West European PS with a monthly increase of €20-30/ton said, “We are not seeing much interest particularly after this increase in the parity.” According to ChemOrbis, another trader who was offering South European LDPE on euro terms last week said, “Our offers may not be found workable now that the euro has moved above 1.32.”