Petrotahlil - Malaysia's state-owned Petronas is offering unbranded polyethylene (PE) and polypropylene (PP) from its Pengerang complex to Turkey, signalling a strategy to diversify beyond China where polymer demand is affected because of the coronavirus outbreak.
Pengerang, a joint venture between Petronas and Saudi Arabia's state-controlled Saudi Aramco, can produce 750,000 t/yr of PE and 900,000 t/yr of PP.
The Malaysian producer offered PP and linear low-density PE (LLDPE) to Turkish customers in recent weeks and is expected to gradually increase its volumes for April.
Turkish polymer buyers remain in a wait-and-see mode, with this week's sharp drop in crude prices adding to existing uncertainty around the impact of the coronavirus. The country announced its first confirmed case of the virus this week, with market participants also monitoring developments in the many other countries to which Turkey exports plastic and textile products.
Ice front-month May Brent contract today was at $34.43/bl, up by $1.21/bl from its settlement yesterday, although prices were still lower by around 24pc from a week earlier.
But supply issues are helping to support Turkish PE prices in the short term and could provide a window of opportunity for Malaysian-origin polymers.
Spot supplies from the Middle East is limited in Turkey this month, largely because of production issues in Saudi Arabia. Saudi Arabia's PetroRabigh late last month shut its 700,000 t/yr PP unit, 600,000 t/yr LLDPE/high-density polyethylene (HDPE) swing line, 300,000 t/yr HDPE unit and 160,000 t/yr low density PE (LDPE) unit. The scheduled shutdown is expected to last until early May.
Turkey's border with Iran is also closed to contain the spread of the coronavirus, halting overland deliveries of PE and PP. Deliveries originally bound for Turkey are gradually returning to producer warehouses in Iran for storage. Iranian supplies are particularly important in the HDPE film and pipe markets.
Spot availability of US-origin HDPE and LLDPE has also been limited in Turkey this year, partly because of shipment limitations out of the US Gulf coast's Houston.
Argus yesterday assessed PP raffia Middle East Gulf origin prices in Turkey at $950-975/t cfr, while LLDPE butene Middle East Gulf origin prices were at $860-880/t cfr. Middle East origin cargoes carry a 6.5pc import duty, while a free trade agreement means that Malaysian polymers can be imported duty free.
Petronas offered in mid-January, before the coronavirus outbreak started, unbranded PE and PP to China, its main target market. But the coronavirus outbreak is leading to shipment delays and manpower constraints in China, affecting demand with major converters running at lower operating rates. This is prompting southeast Asian producers to consider alternative markets like Turkey.
Inventories at Chinese producers Sinopec and PetroChina slightly rebounded to 1.27mn t on 11 March from 1.25mn t last week because of low resin consumption.
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