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Melamine Remains at Low Levels as a Normal Condition Author/Source: Sinochem New Network Date: 12-18-2019 Clicks: 41 Entering the fourth quarter, the melamine market has remained at low levels; most factory prices offered by companies range from 5,400 to 5,600 yuan per ton, while the actual transaction prices are between 5,200 and 5,300 yuan, indicating levels that are among the lowest in history. Looking ahead, negative factors in the melamine market will remain dominant, and it is expected that consolidation at low levels will become the norm. The operation rate remains high. Data from Jinlianchuang’s monitoring show that since November, the operation rate of melamine production has gradually risen to over 70%, with an average daily output of 4,158 tons; thus, the supply of raw materials on site is relatively sufficient. At present, the melamine plant of Shandong Shuntian, the 30,000-ton/year and 60,000-ton/year plants of Jiu Yuan in Xinji, Hebei, the 5 plants of Fengxi in Shanxi, and the 60,000-ton/year plant and two 15,000-ton/year plants of Haohua Junhua in Henan are all operating normally; the atmospheric-pressure plant of Chongqing Jianfeng is functioning properly, while there are no plans to restart its high-pressure plant for the time being. It is understood that there are both enterprises engaged in subsequent maintenance work and those restoring production, and their production capacities offset each other; as a result, the operational rate of these enterprises remains high in the short term. Xiao Yi, head of the marketing department at Hunan Minghui Chemical Co., Ltd., said that the operating rate of the melamine industry has shown an upward trend with fluctuations in recent months. In mid-August, the industry’s operational rate was around 55%; it rose to 65% in mid-October. After entering November, it peaked at 73%. Although it has declined slightly now, it remains above 70%. “The market for melamine is already weak, and with high operating rates, it is even more difficult to see price increases. ”Xiao Yi said. Falling raw material prices According to Tang Feifei, an analyst at Zhuochuang Information, the price trend of urea, the raw material used for melamine, in the fourth quarter of this year differs significantly from that in the previous two years. In the fourth quarters of 2017 and 2018, the trend in the urea market was one of initial decline followed by an increase. This was mainly due to the sharp drop in the operating rate of urea production facilities as a result of efforts to control air pollution and gas shortages, which pushed up urea prices. Additionally, increased purchases of raw materials for compound fertilizers during the fourth quarter also contributed to keeping urea prices high. Entering the fourth quarter of 2019, however, the urea market behaved abnormally, with prices continuing to fall. “The reason for this is that, due to the reduced impact of regular measures to control air pollution on the supply side this year, coupled with the advancement of production schedules to avoid peak periods in autumn and winter, the available supply of spot goods is greater than in the previous two years. ”Tang Feifei analyzed that at the same time, the industries that use urea as a raw material, such as compound fertilizers and synthetic panels, are greatly affected by efforts to control air pollution. Periodic production restrictions and shutdowns have led to a decline in demand for urea, resulting in significant drops in profits, which in turn makes companies more cautious when purchasing raw materials. “In mid-November of this year, the lowest factory price for urea was 1,600 yuan; it has now risen by about 100 yuan, reaching 1,700 yuan. Even if it rises further in the future, it is unlikely to exceed 1,800 yuan. Last year at this time, the price was around 2,000 yuan. The falling prices of raw materials are also a key reason for the low-level performance of the melamine market this year. ”Analysed Yang Zhenming, manager of Guangzhou Yuanhong Chemical Co., Ltd. Export markets are showing signs of weakness. With the domestic market in a poor state, companies have to turn their attention to exports. However, judging from the current situation, the export route for melamine is also not smooth. According to **customs statistics**, in the first 10 months of this year, China exported a total of 256,000 tons of melamine, a decrease of 23.2% compared to the previous year. With the exception of January, when exports exceeded 30,000 tons, exports in all other months were below 30,000 tons. Last year, exports in most months were above 30,000 tons; in fact, in March and April, exports exceeded 40,000 tons for two consecutive months. In addition to the decline in export volumes, the export price of melamine is also falling. In the first 10 months of this year, the average export price of melamine in our country was only 876.9 US dollars, compared to 1197.2 US dollars in the same period last year, representing a year-on-year decline of 26.8%. Yang Zhenming said that the environment for melamine exports has changed significantly at present. In the past, due to the relatively low price of urea in our country, the production cost of melamine was also low, giving it strong competitiveness in the international market; as a result, export volumes kept reaching new highs. However, at present the production cost of urea in our country is relatively high on the international stage, meaning that we no longer have a comparative advantage; it has also become difficult to export melamine. It is likely that the approach of increasing exports to address domestic overcapacity will become increasingly challenging. Xiao Yi is also not very optimistic about the future trend of the melamine market. According to industry statistics, from January to October, China’s melamine production amounted to 1.102 million tons, representing a 5.4% increase on a year-on-year basis. If the utilization rate of melamine production facilities remains high, the imbalance between supply and demand in the market will become more pronounced. At the same time, raw material prices and export conditions are unlikely to provide support for melamine prices. It is expected that the market will remain weak in the coming period, with little possibility of prices breaking through the 6,000 yuan mark in the short term.