PLAST EURASIA 2024: Shrinking margins emerge as a key topic among polymer players

Global plastics players have gathered in Istanbul since December 4 for the 33rd Plast Eurasia Fair. Shrinking margins for both converters and polymer producers emerged as a key topic of discussion during the event, with most participants agreeing that prices might see a recovery in January. Nonetheless, economic hurdles are expected to persist for a while longer, dampening end-consumer spending. Petrochemical companies are likely to maintain supply management strategies through 2025. The fair has concluded on December 7.

Here are the topics that have been high on the agenda during the key industrial event:

•   Long-awaited rebound: When?

•   The main pressure on prices: Ample global supply or derivatives?

•   Concerns over macroeconomy still dominate the outlook

Attendees: Profitability takes a hit from reduced margins

Lower downstream consumption has been suppressing polymer procurement for most of this year, despite some demand from converters sparked by year-end stock depletion. At the fair, manufacturers highlighted persistent economic challenges. "Our profits have been razor-thin for months. As overall consumption decreases, competition in derivative segments intensifies," they stated.

Attendees also cited costly bank loans and muted end demand as factors constraining activity. Several converters, particularly in the textiles industry, opted to run their factories at reduced rates, reporting that demand remained below previous years even during peak seasons.

In addition to manufacturers, sellers have also grappled with low margins, as reduced purchasing power led to hesitant demand, preventing polymer prices from achieving a solid rebound over the past year. Meanwhile, spot olefin prices in Asia were supported by reduced run rates, and European and Asian styrene markets recently signaled stabilization at multi-month lows, keeping margins modest for downstream polymer producers.

Indeed, Türkiye has provided poor netbacks, especially for global PE and PVC sellers. However, this was overshadowed by the year-end lull, with sellers unable to improve margins due to low counter-bids from consumers.

Markets unresponsive to rising freights, yet no more drops likely

Container prices saw upward momentum in the past two months, driven by a rush of Chinese exporters shipping their cargo ahead of the US Trump administration’s projected tariffs. However, the bull run lost steam as November progressed, with some spot routes exhibiting stable to soft trends. As a result, the impact of previous freight hikes on polyolefin, styrenics, and PVC markets has been limited.

“Firmer price attempts for South Korean PP copolymer and PVC following elevated freight rates from Far East Asia faced resistance. Buyers could find competitive prompt materials or refrained from distant cargos,” players noted. Similarly, South Korean PS and ABS saw firmer import offers in the second half of November, but sellers eventually stepped back. They faced challenges from the lack of upward momentum in spot styrene prices and more competitive locally-held prices.

A PE buyer commented, “Some Indian offers were above prevailing market levels. Freight rates made prices from the continent unworkable.” An agent of an Indian PS producer also cited high shipping costs and pressure from domestic materials as reasons behind the lack of interest in their current CIF prices.

Although logistics costs did not significantly boost sentiment, players believe prices signal a stabilization for the upcoming term. This is primarily because markets traditionally pick up in early January, and margins in Türkiye are already unfavorable for global sellers.

PP freed from stock pressure, PE offers just start coming out

Saudi Arabian PPH suppliers sold out their December cargoes last month and might allocate only limited quantities for January shipments. “Some suppliers warned us that we may not secure the previous low-end prices going forward, as import availability is expected to remain moderate,” a sack maker noted. For PE, a recent price cut from the local producer, Petkim kept LDPE sentiment weak, while a couple of producers announced monthly rollovers at $1110-1120/ton CIF for December during the fair.

“Tight Russian and Saudi supplies will support PP in the near term, although a broader recovery in derivatives will be needed for a significant rebound heading into 2025. We have yet to hear fresh LLDPE and HDPE prices, while Iranian PE offers remain sporadic. We may secure slight discounts during the event, particularly if sellers still hold PE stocks in bonded warehouses,”.

PVC buyers chase slight discounts, European sellers sit tight

Unlike PP and PE, import PVC witnessed a short-lived uptrend in September before prices stabilized for European origins and started to retreat for US cargos. Fresh December offers emerged with rollovers in most cases, while players reported hearing slightly lower bids during the fair.

A global trader commented, “Participation in the fair is high, with traders showing particularly strong attendance. Most participants focused on gaining better insight into the market’s upcoming trajectory, with financial challenges remaining the central concern.” Converters said, “European PVC suppliers seem determined to maintain their margins. Meanwhile, players are curious whether the Chinese surplus will find a way to Türkiye next year amid rising barriers from India.”

Aggressive domestic offers still dominate styrenics

Although December styrene contracts in Europe defied larger losses in spot figures, PS and ABS markets remained under pressure of the year-end lethargy. Disregarding buyers who benefited from the recent lows for cargos with delivery in Q1 2025, most consumers preferred to buy just their needs amid the book closures and tepid derivative industries during the low winter season. EPS buyers received price cuts beyond $100/ton for domestic materials while negotiations were underway at the time of writing.

Dwindling locally-held supply may hold ABS close to the current levels while the pressure of attractive domestic offers on GPPS may remain intact until the year ends, as players put it.

Near-to-medium-term projections

While players view mid-term economic indicators pessimistically, the question of when polymer prices will recover has come to the forefront. There was debate over whether the real pressure on markets comes from new global capacities or stagnant end demand. Anyway, ongoing economic supply disruptions in Asia and Europe are expected to extend into 2025.

Import PP and PE prices hit their year-to-date lows in late November as stock clearing activity by Middle Eastern and US sellers led to significant price cuts. Tempting prices stimulated resin demand, prompting converters to secure their needs for Q1 and helping polyolefin suppliers ease stock pressure ahead of the new year. Players concurred that prices have neared or already reached the bottom.

However, it was too early to talk about a rebound despite firmer logistic costs, given prevailing economic conditions and weaker oil prices. “PP has no room for new drops based on recent gains in China’s import market and limited January volumes from Saudi producers. US PE offers on the low end may also fade amid the reemerging strike talks in the country. For PVC, eyes will also stay on US volumes,” a global trader said. On the other hand, the arrival of cargos secured in late Q4 may limit recovery in Q1.

On the economic front, Türkiye faces inflation, external vulnerabilities, and structural challenges that require careful management for medium to long-term stability. Despite modest recovery signs in manufacturing and services, consumer confidence and purchasing power remain low while tight liquidity and cautious lending stifle activity. Turkish exporters struggle with unfavorable FX rates, rising input costs, financing access, and global demand uncertainties while bracing for higher minimum wages soon.

Deutsche Bank has recently published its "Emerging Markets 2025 Outlook" report, evaluating the Turkish economy under the title "Türkiye: A Gradual Path to Stability." Accordingly, it is described as navigating a soft landing, with economic growth slowing gradually. Due to tight monetary conditions and weakened demand for investment and consumption, growth is expected to remain below potential until the latter half of 2025. A more robust recovery is anticipated by 2026. These projections assume the continuation of policies aimed at curbing inflation. This means polymer players are bracing for continued challenges before conditions improve in stages by late 2025/early 2026.