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The melamine market shows strong performance in this \"Golden September\" – Author/Source: Sinochem New Network, Date: 2021-09-18, Clicks: 8. This year’s \"Golden September\" has been a period of strong performance for the melamine market, far outperforming last year’s market conditions. On September 14, the average domestic price of melamine at the factory was 17,216 yuan per ton, a increase of 258% compared to the same period last year. “Although there is strong resistance from downstream users to high-priced raw materials, favorable factors such as tightening supply continue, and it is expected that melamine prices will still have some room for upward movement in the short term. ”According to Ding Xiuna, an analyst at Longzhong Information. Supply continues to tighten. Entering September, the domestic melamine market maintained an upward trend, with the northern market seeing particularly large increases and reaching new highs for the year. As of September 14, the price of melamine had risen by more than 2,700 yuan since the beginning of the month. “A key reason for this sharp rise is that melamine production facilities in Hebei, Shandong, and Xinjiang have been shut down for maintenance, resulting in a reduced supply. Manufacturers are inclined to raise prices, which further drives up costs. ”Ding Xiuna said. Looking ahead, the production facilities of Xinjiang Yuxiang and Xinxinxin are shut down for maintenance; one of the facilities of Anhui Jinhé has a maintenance schedule, while Henan Junhua plans to resume operations during the Mid-Autumn Festival. In addition, Shandong Shuntian has plans to put its new 50,000-ton/year production facility into operation, but the output during the commissioning period is likely to be limited. Coupled with the fact that various melamine manufacturers are mainly taking on small orders on a controlled basis, it is expected that the tight supply situation in the market will not ease in the short term. In addition to the positive factors on the supply side, strong exports have also contributed significantly to a favorable market situation for melamine during the \"Golden September\" period. In the first seven months of this year, China’s melamine exports amounted to 257,500 tons, accounting for about 31% of the country’s total production. Export demand is strong, and domestic melamine manufacturers are receiving many export orders. Furthermore, against the backdrop of India reducing its anti-dumping duties on cyanamide from China, exports of cyanamide to that country are expected to increase in the future, which will continue to be positive for market prospects. Cost support remains strong. After entering September, the market for urea, the raw material used in the production of melamine, continued to show upward trends, thereby strengthening the cost-based support for melamine. Zhang Yuming, manager of Jiliyuan Fertilizer Co., Ltd., explained that with the centralized maintenance of urea production facilities, the daily output has dropped significantly. In regions such as Shanxi, there has been an increase in some orders related to port collection, and there is also a modest amount of agricultural demand in certain areas such as the southwest and north China. In addition, prices in the natural gas and coal markets rose generally, and various factors contributed to upward fluctuations in urea prices. “Overall, the price increase of melamine has been greater than that of upstream raw materials, allowing manufacturers to reap substantial profits. Based on the calculation that 1 ton of melamine can be produced from 3 tons of urea, and at current market prices, after deducting costs such as labor and management expenses, the profit margins for major domestic melamine producers are as high as over 9,000 yuan, an increase of 2,000 yuan compared to August. This has effectively enhanced the profitability of the melamine market during the \"Golden September\" period. ”Zhang Yuming said. Looking ahead, rumors regarding mandatory inspections for urea exports are circulating widely, adding uncertainty to exports. Furthermore, there is no news regarding Indian export quotas at the moment, which has led to a decline in trading activity in the market. However, large-scale stockpiling by downstream users has not yet taken place; it is expected that the domestic urea market will remain volatile within a high-level range. As for melamine, cost factors continue to provide support. Demand limits price increases. Although there are positive factors on the supply and cost sides, issues such as poor transmission of costs and difficulty in boosting demand from end-users will dampen the upward momentum in the melamine market. Ding Xiuna explained that downstream manufacturers are unable to bear the high costs associated with melamine, so there has been no significant improvement in their production rates. However, tight supply and strong exports allowed melamine to largely escape the influence of demand factors, leading to a unilateral and unrestrained upward trend in prices. Owing to production demands, end-users are forced to passively follow through with necessary purchases. Faced with continued weak demand in the domestic market, domestic end-product manufacturers are quite resistant to using expensive raw materials, which has prevented an increase in market transactions. In an effort to minimize profit losses, with the Mid-Autumn Festival and National Day approaching, some plywood and melamine factories have already stopped production in order to avoid market risks. The downstream melamine impregnated paper factories are performing fairly well. However, if the price of melamine continues to rise, it will further squeeze corporate profit margins, and it is also possible that paper impregnation companies may decide to close down ahead of schedule. “Although weak demand makes it difficult to drive the melamine market to continue rising sharply, manufacturers do not face any sales pressure at all; although domestic orders are limited, exports remain strong, resulting in a situation where the market performs better abroad than domestically. Therefore, in the competition between upstream and downstream markets, sellers continue to hold a dominant position; the risk of sharp price drops is essentially ruled out, and the melamine market may see a slight increase in the short term. ”Ding Xiuna analyzed and believed.