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Melamine: Stagnant at low levels, waiting for a rebound Author/Source: Sinochem New Network Date: 2019-06-21 Clicks: 3 Since the beginning of this year, the market for melamine has been relatively sluggish. Currently, manufacturers’ export prices range from 5,400 to 5,700 yuan per ton, while actual transaction prices are between 5,200 and 5,400 yuan per ton. In Xinjiang, prices have even dropped below 5,000 yuan, ranging from 4,700 to 4,800 yuan per ton – the lowest level seen in nearly two years. Industry experts say that there are expectations of an increase in the price of raw material urea, and as traders cautiously increase their stockpiling, there is demand for a rebound in the melamine market. However, the extent of price increases will depend on changes in the operating rates of manufacturing companies. Weak downstream demand Xiao Yi, head of the marketing department at Hunan Minghui Chemical Co., Ltd., said that the weak trend in the melamine market is mainly due to weak downstream demand and a significant imbalance between supply and demand in the market. The main downstream industries of melamine, such as wood-based panels and impregnated paper, are closely related to the real estate market. On a macro level, the slowdown in real estate development is also leading to a decrease in demand for melamine. **According to data from the Bureau of Statistics, from January to May, the sales area of commercial housing in China was approximately 555 million square meters, a decrease of 1.6% compared to the previous period, with the decline rate being 1.3 percentage points higher than that from January to April. Furthermore, due to stricter environmental regulations, companies in industries such as wood-based panels have reduced production or halted operations on a large scale, resulting in unstable demand for melamine. Domestic demand for melamine is weak, and international demand is also not optimistic. According to **customs statistics, from January to April, China exported a total of 111,000 tons of melamine, a decrease of 21.9% on a year-on-year basis. In April alone, 22,000 tons were exported, representing a drop of 50.4% compared to the previous year. Not only is the export volume of melamine declining, but its export price is also falling. In the first four months of this year, the average export price of melamine was 957.5 dollars, a 22.3% decrease compared to the previous year, indicating a trend of both falling prices and decreasing volumes. “Faced with weak domestic demand, melamine manufacturers are also actively seeking export opportunities, particularly by increasing exports to neighboring ** regions. In the first four months of this year, China exported 14,800 tons of melamine to Russia, accounting for 19% of its total exports. Overall, however, as international market competition becomes increasingly fierce, it is becoming more difficult to export melamine. ”Xiao Yi said. A rebound is brewing in the market. “After a long period of consolidation at low levels, there is now a need for a rebound in the melamine market.” ”said Yang Zhenming, manager of Guangzhou Yuanhong Chemical Co., Ltd. Regarding the raw material urea, the current factory price is around 1,900 yuan; under normal circumstances, the price of melamine should be above 7,000 yuan. Last June, the price of urea was slightly higher than it is now, at around 2,000 yuan, while the factory price of melamine was 7,300 yuan. In June of the year before last, the price of urea was lower, around 1,620 yuan, but even then the price of melamine was 6,500 yuan, which is much higher than the current price of over 5,000 yuan. Yang Zhenming said that looking ahead, as seasonal demand declines and production rates increase, urea prices might fall slightly, but the drop will not be significant. At the same time, international urea prices are rising, and export opportunities have reappeared, which will provide support for domestic urea prices; therefore, an increase in urea prices is a likely outcome. Rising raw material prices and increased costs will be the main drivers behind a rebound in the melamine market. Additionally, there are more dealers who are buying at rock-bottom prices now. Melamine does not clump or deteriorate over time, making it a suitable variety for storage. After seeing the price of melamine reach new lows, some distributors are beginning to stock up on it in a tentative manner, which could help boost prices in the melamine market. Pay close attention to the operating rate. At present, the biggest negative factor in the melamine market is high production levels. Despite the extremely low price of melamine and the significant losses incurred by manufacturers that use purchased urea to produce melamine, there is still no clear sign of companies reducing their production volume in order to maintain prices, and the operating rate of these facilities remains high. According to Li Runqi, an analyst at JLLC, in the second week of June, the average operating rate of the domestic melamine industry was 65.5%, up 0.8% from the previous week. Among them, the production rate in Shandong is 55.1%, in Xinjiang it is 73.7%, and in Sichuan it is 89.4%. The weekly domestic production of melamine is around 31,000 tons, with an average daily production of 3,881 tons. Specifically, at present, the melamine production unit at Henan Zhongyuan Dahuahua has resumed operations; the plant in Hubei Huaqiang has returned to normal operation; the maintenance unit in Yuxiang Fukang, Xinjiang, has been restarted; the 25,000-ton/year plant in Shanxi Fengxi is shut down, while the other plants are operating normally; the 15,000-ton/year plant at Henan Jinshan Jindadi is shut down for maintenance; the plant in Shaya, Xinjiang, is operating at reduced capacity; the atmospheric pressure plant in Chongqing Jianfeng is functioning normally; the plants in Shandong Luxi, Jiangsu Nantong Zixin, Shandong Sanhe, and Xinjiang Yihua remain shut down, with a restart date yet to be determined. “The operating rate has become the most critical factor affecting the future trend of the melamine market. If this rate remains high, even if there is a rebound in the market, it will not be strong enough, and it may be difficult to break through the 6,000 yuan mark. ”Xiao Yi said.