Melamine Market Faces Downward Pressure from Oversupply, Weak Demand

Key Highlights

• Melamine Prices: Benchmark price dropped to USD920/MT, down 0.19% from earlier this month.
• Supply and Demand Dynamics: Increased Supply: New production facilities like Xinjiang Yankuang and Henan Jinkong Tianqing have expanded capacity.
• Weak Demand: Industries reliant on melamine, such as sheet metal and impregnation processes, are operating below capacity.
• Raw Material News: Urea prices dropped to USD300/MT (0.63% decline), reflecting lower coal and natural gas production costs.
• Market Outlook: Limited potential for a rebound unless demand significantly recovers.

Melamine Prices: A Persistent Decline Amid Weak Market Trends

• Imported melamine in Mundra is priced at ₹80 per kg with no price change over the past day. The benchmark price of melamine stands at USD920/MT, marking a decrease of 0.19% from the beginning of the month when it was USD924/MT in the asian market
• This decline in price reflects the ongoing challenges in the market, primarily driven by an oversupply scenario paired with weak demand.
• While there have been fluctuations in pricing throughout the month, the overall trend indicates a gradual downward shift as market conditions evolve.

Melamine Supply Surge: New Capacities and Restored Operations Add Pressure

• New Production Capacity: Several melamine plants have recently commenced operations or are poised to do so in the near future. Notable contributors include Xinjiang Yankuang and Henan Jinkong Tianqing, among others. The introduction of new production lines is expected to substantially increase the overall market supply.
• Restoration of Maintenance Equipment: Some melamine production units that were previously offline for maintenance have resumed operations. This restoration has further contributed to the heightened supply levels in the market.
• Downstream Industry Performance: Industries that rely heavily on melamine, such as sheet metal fabrication and impregnation processes, are currently operating below capacity. This reduced production load has led to a diminished need for melamine, creating a gap between supply and demand.
• Reduced Procurement Activities: In light of increased supply and insufficient demand, downstream manufacturers and traders have scaled back their procurement efforts. This cautious approach is further exacerbating the weak market conditions.

Chemical News: Urea Prices Ease, Potential Impact on Costs

• The price of urea, a critical raw material for melamine production, has seen a decline this week due to several factors:
• High coal inventories and reduced costs associated with coal and natural gas have contributed to lower production costs for urea.
• As of November 6, 2024, urea's benchmark price was recorded at USD300/MT, down 0.63% from earlier in the month (USD303/MT). This decrease may provide some leeway for melamine producers but also reflects broader market challenges.
• Xinjiang Xinye Energy Chemical has restarted its 1,4-butanediol (BDO) Plant. The Plant is located in Urumqi, Xinjiang, China with a production capacity of 60,000 Tons/Year.
• Petronas Chemicals Ethylene has delayed the restart of its Cracker, which was shut on 25th September, 2024 for maintenance work. The Cracker is located in Kerteh, Malaysia with Ethylene production capacity of 400,000 Tons/Year.

Chemical Market Outlook: Challenges in Price Recovery Persist

• The melamine market outlook remains cautious due to a significant supply-demand imbalance. With new production capacities coming online and weak downstream demand, price pressure is expected to persist. Analysts predict melamine prices will stay low in the near term, with limited potential for a price rebound unless there is a notable recovery in demand from downstream sectors.