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'Catastrophe' for Turkish polymer markets as lira plunges to historic lows

Highlights

Lira down 20% in Nov to fresh record lows

Turkish buying activity scarce as buyers sit on sidelines

The rapid depreciation of the Turkish lira in recent days is a "catastrophe" for the country's polymer markets, with market sources expecting spot trade to be severely limited into the key import hub at least until the end of year.

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The value of the lira against the dollar has plunged by as much as 20% so far in November, and fell by some 15% on Nov. 23 alone.

The lira's weakness causes particular challenges for Turkish traders who buy internationally in dollars or euros before selling locally in lira, as well as Turkish end-users -- the majority of which are small-to-medium sized firms -- who buy in dollars before selling finished goods domestically in lira.

The currency crash is forcing exporters to discount and in some cases slash their offers into Turkey, with purchasing grinding to a halt as buyers step away from a market that was already struggling in the face of high price levels.

"It is a catastrophe... we have to fight against the lira dollar crisis," one Turkish trader said.

The currency crisis is worse even than that of 2018, and follows the country's central bank cutting interest rates again to 15%, under pressure from President Recep Tayyip Erdogan, despite inflation reaching nearly 20%. The lira fell below 13 to the dollar for the first time in history Nov. 23, having sunk below the symbolic Lira 10 per dollar mark for the first time earlier this month.

"We are passing through dire straits, the economic situation in Turkey is chaotic," another Turkish trader said.

"Only a few weeks ago I mentioned $1 was around 9 Turkish lira, it is now 13.50 lira and now what we called 'a bit settled' is 12.50. There was a big silence in the market, no done deals, no offers were heard. Food prices, fuel prices, all human needs prices are changing daily," the trader said.

Turkish polyvinyl chloride spot prices were expected to fall by as much as $80/mt, and up to a total of $250/mt since the start of November, in reaction to the latest currency moves, a European market source said.

Spot prices have fallen $50/mt from October's peak to $2,200/mt CFR Turkey Nov. 17, according to S&P Global Platts data. But with offers falling under the weight of buyer resistance, trading levels were seen at $2,080/mt CFR Turkey already in the week to Nov. 24, with offers from South Korea seen at $2,100/mt CFR Turkey.

In some cases, dutiable material offered direct from Russia was available at around $1,200-$1,300/mt CIF Turkey, according to a distributor.

"Demand is subdued for several reasons, such as low-capacity utilization rates, resistance to inflated price offers, worrisome weakness of Turkish lira against major foreign currencies, and buyers are avoiding building stocks in the expectation of further price drops," a third Turkish trader said.

This contrasts with the current strength in the European market, which is expected to continue to hit record highs in November on tight European supply and healthy construction demand.

The currency weakness is also causing challenges for other polymers, such as polypropylene and polyethylene grades, with Turkey heavily dependent on imports for all grades except LDPE.

A European trader source said that he was starting to receive offers from Middle Eastern suppliers who are now unable to sell into Turkey, with Turkish buyers also heard looking to re-export material.

"Turkish traders are starting to call me to make offers from the Middle East which is not normal and means that the [Turkish] market is not doing well. They are offering material from Qatar," the trader said.