James: Hello and welcome to this Argus "Chemicals Conversation" podcast. This is the sixth episode in our K Show plastics preview series. Today we'll be discussing the Turkish market. I'm your host James Elliott, and I'm joined by my colleague, Dila [SP], senior reporter for polymers. Hi Dila, how are you?
Dila: Hi, James. I'm good. Thank you. How about you.
James: Excellent. Thank you. First question for you, Dila, how is the Turkish market performing? Tell us about the current demand situation.
Dila: Well, James, the Turkish market has been struggling with low demand for the past couple of months. And there are obviously several reasons for that. But the first reason, the initial reason, I might say that it's the economical struggles in the country of financial problems. And we are seeing that every month the demand is not increasing as we expected, but instead it's decreasing. Normally in the Turkish market, the behavior of the buyer is that when the prices hit the bottom level, and then when they start to increase, the Turkish market starts buying material. The demand increases once the price start to increase.
It's more of a impulse buying behavior in the Turkish market. But at the moment, for the past couple of months, we have been seeing that no matter if the prices are decreasing or increasing, the demand is not being affected by it because of, as I said, the low demand from the end user side, the economic problems and what had been going on in the region. These are all affecting the demand. And I can say that it hasn't been good and it is not at the expected or the desired level at the moment as well.
James: Dila, is there any sign that demand could recover over the coming months?
Dila: The thing is, at the moment, the inventory levels in the warehouses are at good levels in the Turkish market because during the tension in the Middle East region, it was almost the same time as one of the major producers in the Middle East started their new capacity and they started offering at very low prices compared to other Middle Eastern producers.
So with the tension started and the lower prices that came from the new capacity, the Turkish buyers just thought, "Okay, the tension might grow. It might affect the freight. It might affect the material that's coming to the Turkish market so if the prices are low now, why not buy now?" There wasn't actually a demand from the end user side in the Turkish market. However, the buyers, mostly the traders, were kind of in a panicky mood because of the tension, and they just thought, "Okay, if the prices are low, why not buy now?"
So they just bought the material and put it in their warehouses. However, after the tension was kind of resolved and the material just stayed there because as I said, there is no actual demand from the end user side. And at the moment, the Turkish market is kind of relying on the ready material from the warehouses instead of buying new loading material because they don't want to deal with the freight duration, they don't want to deal with the changing prices and the devaluating Turkish lira. So when they want to buy material, which is not large quantities, given the low demand, they just go to the warehouses and buy the material that they want. But this is causing the demand for the new loading material to be low. And we are expecting that for at least two months more the situation will be like this because, as I said, there is a good amount of material in the warehouses right now.
James: Great. Thanks, Dila. I think you traveled to Turkey on a recent trip. Have you got any additional insights from on the ground and in your meetings that you can share with us?
Dila: Yes, I traveled to Gaziantep to meet with the end users there two weeks ago. You know, I think networking and relationship building is very important when it comes to our jobs. And that's actually one of the reasons why Argus started to gain the contract prices in Turkey. The companies started to use Argus for their contracts, thanks to our accurate pricings and our network building.
And yes, I mean the feedback that I got from the end users there was that, there, demand is getting lower and lower every month. Usually, their behavior is that they buy raw material during summer and between the 9th and 12th months, they just sell carpet. But that wasn't the case this year. They didn't buy raw material as much as they did in the previous years, and hence their carpet producing is very, very low this year compared to the previous years. So from the end user side in Turkey, things are not looking great either given the demand is very low for the end product as well.
James: What does this all mean for pricing, Dila? Have prices bottomed out yet or can we expect further decreases?
Dila: I don't think they're bottomed out yet. I think there's still some space left for the prices to go lower, especially for PP. We are still expecting $20 to $30 decreases in the upcoming weeks for PP. And the market is kind of expecting and waiting for that as well because what I gathered from the people is just they say that, "Well, there is actually ready material in the warehouses and if we were to buy new loading material, it should be at lower levels." So since they're not in a rush, they're expecting that there will be further decreases in the upcoming ones, as I said, $20 to $30. So they are waiting for those decreases to buy material basically.
James: Excellent. Thank you, Dila. Really insightful.
Dila: Thank you, James.
James: If you would like to meet with Dila or our Argus Polymers team at K Show, please get in contact. Thank you for listening to this episode of the K Show Plastics Preview by Argus "Chemicals Conversation." Thank you and goodbye.
