Monday, 15th march 2021 | General News
Marco Arezio - Consulente materie plastiche - The Chaotic Situation of Polypropylene in Turkey: the Perfect Storm

A period like this will be remembered for a long time, not only by the Turkish industrial system that uses polypropylene but, cascading, also the buyers of the finished products that Turkish factories supply and the financial system that is under pressure.

The disproportionate increases in polypropylene in Turkey are the consequence of a series of exceptional situations that have occurred on world commodity markets virgins, manifesting as a perfect storm.

And like all sudden storms, the situation also took Turkish buyers by surprise, creating a series of difficulties on the supply of raw materials, on the levels of unsustainable prices and on company budgets.

The concatenation of events hit on forecast analyzes of regular PP availability, albeit with a forecast of a price increase that seemed sustainable and cyclical. Expectations of a gradual rise hinged on the consideration of an extremely long period of below-average prices, a hypothesis of international recovery and the approach of the Chinese New Year which would have released more availability on the market.

In reality these theses have been found to be wrong about the exceptional nature of the events that have occurred:

• The meteorological problems in the USA with a collapse of PP production

• The shifting of parts of the global inventories of producers to more profitable markets such as the US and Europe

• The shortage of circulation of containers that has soared prices

• The linking of production shutdowns to plants, partly already planned, such as Total, Ineos, LyondellBasell, ExxonMobil, Borealis and Unipetrol. Stocks also reduced in the Middle East, an area of normal supply for Turkey

• The reduction of the Chinese New Year holidays due to Covid with a recovery in the consumption of polymers earlier than expected

• The slowdown in customs operations causes Covid.

These linked events have brought a very high price level to Turkey, with a shortage of availability that has put local producers in crisis.

Operators declare increases for PPH of $ 350-500 per ton, from week to week and buyers do not know how to constructively convey to the commercial sector increases in product costs.

Price growth as a percentage reached 49% for PP Raffia and 32% for PPBC by injection, compared to February 2021, creating chaos above all in companies that work with supply contracts for customers who assemble semi-finished products produced in Turkey.

It is not only the contribution margins on orders that no longer match, but also the impossibility of producing due to the lack, even at any price, of the raw material .

Not even the increase of the Turkish lira against the dollar has been of help in this paradoxical situation, which is bringing the plastics sector to its knees by having a weight in the country of crucial importance.

There are questions about when this situation can be resolved, but analysts are prudent in establishing dates, as the phenomenon is complex and the resolution of the problems passes from 'positive evolution of all the factors described above.

Automatic translation. We apologize for any inaccuracies. Original article in Italian.

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