Price trend

Last week, the domestic melamine market continued its weak trend, with a downward shift in price focus and a light trading atmosphere. As of July 21st, the benchmark price of melamine in SunSirs was 5,837.50 RMB/ton, a decrease of 0.85% compared to the beginning of this month (5,887.50 RMB/ton). Compared with the high of 6,875 RMB/ton in the same period last year, it had dropped significantly by 19.6% year-on-year, with a price difference of 1,038 RMB/ton, reflecting a clear loose supply and demand pattern in the market.

Analysis review

Raw material:

From the upstream of the industrial chain, the raw material urea market continued to weaken last week, although there was a slight rebound recently due to local device maintenance. As of July 21, the benchmark price of urea in SunSirs was 1,830.00 RMB/ton, a decrease of 0.46% compared to last week (1,838.00 RMB/ton). The sustained low operation of raw material prices had significantly weakened the cost support for melamine production. According to estimates, the production cost of melamine had decreased by about 15% compared to the beginning of the year, and the price drop of the product was even greater, resulting in a continuous compression of the industry's profit margin. Some small and medium-sized enterprises had approached the breakeven line.

Supply and demand side:

From the perspective of supply and demand pattern, the melamine market presented a dual weak characteristic of "weak supply and weak demand". In terms of supply, the industry's average operating rate remained at a low level of 56.73%, a decrease of 4.15 percentage points from the same period last year. However, social inventory remained high and the speed of destocking significantly slowed down. The demand side continued to be weak, and dealers generally adopted a wait-and-see attitude, resulting in a low willingness to purchase. Affected by the deep adjustment of the real estate industry, the order volume of downstream panel enterprises had significantly shrunk, only 20% -35% of the same period last year. The operating rate of enterprises continued to operate at a low level, and the procurement of melamine was strictly controlled within the necessary amount.

Under the pressure of market supply-demand imbalance, some atmospheric pressure units had actively reduced their production load, and some enterprises had chosen to shut down for maintenance to alleviate inventory pressure. The performance in import and export was flat, with a cumulative export of 320,000 tons from January to June, a slight increase of only 0.32% year-on-year. It is expected that the annual export volume will be in the range of 400,000 to 550,000 tons, making it difficult to effectively digest domestic excess capacity.

The melamine market was facing dual pressures of insufficient cost support and weak demand follow-up. On the one hand, the prices of raw materials such as urea continued to fluctuate at a low level; On the other hand, downstream industries such as sheet metal and coatings had entered the traditional off-season, with low purchasing enthusiasm. In addition, the lack of significant improvement in export orders had led to the gradual accumulation of market inventory pressure. It is expected that without significant positive stimuli in the short term, the price of melamine may continue to maintain a weak and volatile pattern.

Future outlook:

Looking ahead to the future, under the dual pressure of expected resumption of production and seasonal demand off-season, the market is unlikely to show signs of recovery in the short term. It is expected that some factories in the northern region may lower their prices by 50-100 RMB/ton, while in Xinjiang, due to major equipment repairs, local prices may get temporary support.

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