Turkey’s polymer markets on hold with elections around the corner

Petrotahlil:

Polymer markets have stalled now that only a few days are left for local elections on March 31. Although expectations for April have been shaped by a bunch of factors, economic uncertainties have created renewed caution in markets.

Growing parity concerns dominate markets 

The Turkish lira appreciated gradually starting from October last year after it hit a historical low at 6.88 against the US dollar in mid-August. The USD/TRY parity hovered around 5.20-5.30 during February before the US dollar bounced back up to 5.75 on March 22.

Polyolefins closing March on a firm footing 

Towards the end of February, polyolefin buyers returned to the market as they started to run out of their low inventories which buoyed buying interest across the board. This coupled with diminishing prompt supplies and exerted an upward pressure on prices along with supportive upstream chain.

PP prices recorded notable hikes driven by reduced allocations from regular Middle Eastern suppliers. Accordingly, generous netbacks attracted deep-sea cargos from America by mid-March and fed the market. According to ChemOrbis Price Index, import homo-PP prices have been almost stable at their highest levels in 8 months for fibre and 4 months for raffia on a weekly average this week.

Similarly, PE offers headed north over the past month albeit at a slower pace than PP. Middle Eastern suppliers cut their allocations to Turkey as 2019 kicked off, citing low netbacks when compared to China. A lack of availability from Iran amid rising freight rates ahead of Newroz Holiday and a shutdown in Qatar reinforced supply constraints. 

Nonetheless, wider economic uncertainties amid the fluctuating parity have taken center stage recently and capped the bullish run for polyolefins. “The majority of players are sticking to the sidelines to monitor financial markets instead of trading,” said a large trader. 

PP holds firm on supply constraints 

The short-term outlook for PP appears strong as supply remains tight. Sellers plan to preserve their firm pricing policy in April based on high crude oil and naphtha costs. A large trader highlighted, “We are optimistic about the post-elections period although the parity may see short-lived fluctuations in early April. We expect to see healthy PP demand until May.” 

Nonetheless, buyers do not see sizeable increases likely in April, saying, “Although uncertainty will fade to some extent after elections, economic concerns are likely to persist in the following period. High interest rates still hinder activity while the US dollar may move up temporarily. The approaching Ramadan will also weigh on business in the medium term.”

Renewed hike attempts probable for PE 

In April, suppliers are believed to be readying to seek hikes for the second straight month, counting on their supply limitations. Theoretical netback calculations based on import PE prices in China also suggest that Turkey still lacks premium over China.

Nonetheless, buyers do not expect to pay large increases. “Iranian cargos that were secured before Newroz will start to be shipped starting from the first week of April. Thereby, the market is unlikely to face a severe shortage,” commented a packaging converter, who expects to be delivered his US cargoes in a few weeks.

PVC draws mixed outlook 

American PVC prices softened in H2 March in Turkey under pressure from falling Asian markets and waning demand particularly for k67.

Meanwhile, European prices have stabilized at their highest levels since mid-August last year. Regional sources are expected to seek rollovers. Some traders affirmed, “A West European major informed us that they will be unable to supply much material particularly for k70 for another month.”

“Domestic end business has been unsatisfactory since Q3 2018 due to mediocre construction sector, while our exports are fortunately brisk. We are covered until end May,” a profile maker noted.

PS players set to monitor styrene 

Spot styrene prices displayed a firm trend for the most part of March and generated expectations for a new series of price increases for the downstream PS market. A South Korean producer issued $50/ton hikes for April shipments.

“Reduced supply from Iran has kept PS availability moderate so far this year, while the starting season may boost buying appetite in spring,” traders noted. Still, the upstream chain will be closely tracked by participants.