Turkish polymer demand sinks amid currency turmoil

31-Jan-14

Turkish demand for key polymers such as polyvinyl chloride, polyethylene and polypropylene has sunk due to fall in the Turkish lira despite the intervention of the central bank, as per sources in Platts. After a crisis meeting late Tuesday, the central bank hiked its overnight lending rate to 12% from 7.75%, the overnight borrowing rate from 3.5% to 8%, and one-week repo rate to 10% from 4.5%. The lira weakened in opening trade on Thursday as the US Federal Reserve's decision to further cut its stimulus overshadowed the effects of a big rate rise by Turkey's central bank. The currency was at 2.2681 to the dollar and 3.0907 to the euro in early transactions, compared with 2.25 and 3.06 at the end of trade on Wednesday. It was still above the record low of 2.39 to the dollar it was languishing at on Monday. So far, Turkey's rate hike has not eased the payment issues in the polymer market, sources said this week. "Payment is an issue for [Turkish] polyethylene and polypropylene converters," a Turkey-based trade source said. As a result, some Turkish PE converters have halted production lines and the country's major petrochemicals producer, Petkim, is not producing at full capacity, sources said. The fall in the lira has led to a drop in polymer prices delivered into Turkey, Platts data shows. The LDPE price was last assessed at London close at US$1672.50/mt CFR Turkey, down US$5 week on week, marking a two-month low. PP homo price was assessed at US$1610-1615/mt CFR Turkey at Wednesday's close, down US$10, a low not hit since December 11, 2013. PVC price was last assessed at Wednesday's close at US$1050-1055/mt CFR Turkey, down US$20 week on week, marking a three-week low.