Under the support of tight supply, the melamine market has indeed shown a trend of rebounding from decline to rise. As of September 2nd, the benchmark price of melamine in Shengyi Society was 5675.00 yuan/ton, an increase of 0.22% compared to the beginning of this month (5662.50 yuan/ton).
| Melamine |
1、 Price trend:
The price trend of melamine in August can be described as fluctuating. The domestic melamine market fluctuated in July.
Early October: The market continued the weakness of July, and prices were under pressure at one point.
Mid month: There was a noticeable rebound. This is mainly due to the sharp contraction of the supply side: affected by the continuous high temperature weather, the equipment in major production areas such as Sichuan and Anhui passively reduced load, and the overall load rate of the industry fell to about 40% at one point (mid August data). The tight supply has led to sustained low inventory in the market, and some manufacturers have adopted a strategy of controlling quantity and accepting orders, driving prices to rise accordingly.
Late to present: Market sentiment tends to be cautious, and prices have entered a stable consolidation stage. With the restart of some maintenance facilities, the capacity utilization rate has significantly rebounded from its low point (as of August 28th, the capacity utilization rate has risen to 58.5%), and the increase in supply has eased the previous tense situation. At the same time, there has been no strong recovery on the demand side, resulting in a lack of sustained upward momentum for prices and an overall trend towards stability.
2、 Supply side:
The changes in the melamine market in August were mainly driven by changes in the supply side. During the month, the industry’s operating rate plummeted to 44.32% (the lowest level in nearly three years), and daily production decreased significantly by over 30%. This is the most core factor driving the price to stop falling and rise again. Subsequently, with the planned restart of some maintenance facilities, the capacity utilization rate rebounded from a low level, and the supply side’s support for prices weakened to some extent.
3、 Demand side:
The demand side has not provided strong upward momentum for prices:
In terms of domestic demand: Although the demand for the main downstream board industry has slightly rebounded, it is still constrained by the sluggish real estate industry, and the overall recovery is limited.
In terms of foreign trade, the export market has shown lackluster performance, with limited new orders. Although the cumulative export volume from January to May was 263100 tons, a slight increase of 0.34% year-on-year, the adjustment of international tariff policies has also affected exports.
Downstream procurement should be cautious and focus on on-demand procurement.
4、 Cost side:
Weakening of raw material urea prices: As the core raw material of melamine, urea prices showed an overall downward trend throughout August. As of September 2nd, the benchmark price of urea in Shengyi Society was 1707.50 yuan/ton, a decrease of 0.29% compared to the beginning of this month (1712.50 yuan/ton). The decline in urea prices has weakened the cost support for melamine.
Despite the decline in raw material prices, the rebound in melamine prices is limited, and the industry as a whole is still in a loss making state. As of August 28th, the production profit margin was -1.38%, although slightly narrowed from the previous week’s -1.40%, it did not fundamentally improve. The operational pressure on enterprises remains significant.
5、 Future prospects
For the melamine market in September, it is expected to show a pattern of stable to weak and fluctuating consolidation:
Supply side: Capacity utilization is expected to continue to rise slightly. If the operating rate continues to recover, market supply will increase, which may suppress prices.
On the demand side, the traditional peak consumption season of “golden September and silver October” is the biggest expectation of the market. If the demand for downstream industries such as sheet metal can increase as scheduled, it will become a key driving force for price increases. On the contrary, if the demand recovery falls short of expectations, the market will find it difficult to shake off the weak trend.
Cost side: Urea prices are expected to maintain a volatile pattern within a narrow range, and the cost impact on melamine may be relatively neutral.
In summary, the melamine market achieved a rebound in August due to the tightening of supply beyond expectations. But with the gradual recovery of supply and the lackluster performance on the demand side, the market’s upward momentum weakened and entered a stage of stable consolidation. Whether the market can break out of the consolidation pattern in September largely depends on whether the demand increment brought by the traditional peak season of “Golden September and Silver October” can arrive as scheduled. If demand can be effectively released, prices are expected to gain new upward momentum; If demand continues to be weak, the market will find it difficult to shake off a weak and volatile trend.
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