Price trend

Supported by tightening supply, the melamine market has indeed rebounded. As of September 2, the benchmark price of melamine on SunSirs was 5,675.00 RMB/ton, up 0.22% from the price of 5,662.50 RMB/ton at the beginning of the month.

The price trend of melamine in August was full of twists and turns. In July, the domestic melamine market experienced mixed growth and decline.

Early August: The market continued its weakness in July and prices were under pressure for a while.

Mid-August: A significant rebound occurred. This was primarily due to a sharp contraction in supply: Due to persistent high temperatures, plants in major production areas like Sichuan and Anhui were forced to reduce their capacity, causing the industry's overall load factor to fall to around 40% (mid-August data). Tight supply led to persistently low market inventories, prompting some manufacturers to adopt a strategy of limiting order intake, driving prices upward.

Since the end of the month: Market sentiment has become more cautious, and prices have entered a period of stabilization and consolidation. With the restart of some units under maintenance, capacity utilization has significantly rebounded from its low point (as of August 28, capacity utilization has risen to 58.5%). This increase in supply has eased the previous tight situation. At the same time, the lack of a strong recovery on the demand side has led to a lack of sustained upward momentum for prices, resulting in overall stabilization.

Analysis review

Supply Side:

Changes in the melamine market in August were primarily driven by changes on the supply side. Mid-month, the industry's operating rate plummeted to 44.32% (the lowest level in nearly three years), with daily output plummeting by over 30%. This was the core factor driving prices back up. Subsequently, with the planned restart of some units under maintenance, capacity utilization rebounded from low levels, weakening supply-side support for prices.

Demand side

Demand was not providing strong upward momentum for prices.

Domestic demand: While demand in the major downstream panel industry had rebounded slightly, it remained constrained by the sluggish real estate sector, limiting overall recovery.

Foreign trade: The export market performed sluggishly, with limited new orders. Although cumulative exports from January to May reached 263,100 tons, a slight year-on-year increase of 0.34%, adjustments to international tariff policies also impacted exports.

Downstream procurement was generally cautious, focusing on on-demand purchases.

Cost side:

Weakened prices for raw material urea: Urea, a core raw material for melamine, saw an overall downward trend in prices throughout August. As of September 2nd, the benchmark price of urea on SunSirs was 1,707.50 RMB/ton, down 0.29% from the price of 1,712.50 RMB/ton at the beginning of the month. This decline in urea prices weakened the cost support for melamine production.

Despite falling raw material prices, the rebound in melamine prices was limited, and the industry as a whole remained in the red. As of August 28, the production profit margin was -1.38%, a slight improvement from the previous week's -1.40%, but no fundamental improvement. Businesses remained under significant operating pressure.

Market outlook

The melamine market in September is expected to remain stable but weaker, with a fluctuating consolidation pattern.

On the supply side, capacity utilization is expected to continue to recover slightly. If operating rates continue to recover, market supply will increase, which may suppress prices.

On the demand side, the traditional peak consumer season of September and October is the market's biggest anticipation. If demand in downstream industries like panel production increases as expected, it will become a key driver of price increases. Conversely, if demand recovery falls short of expectations, the market will struggle to escape its sluggish trend.

Cost side: Urea prices are expected to fluctuate within a narrow range, and the impact on melamine costs may be relatively neutral.

In summary, the melamine market rebounded in August, driven by an unexpectedly tighter supply. However, with the gradual recovery of supply and sluggish demand, the market's upward momentum weakened, entering a period of stabilization and consolidation. Whether the market can break out of its consolidation pattern in September depends largely on whether the expected increase in demand from the traditional peak season of "Golden September and Silver October" can materialize as expected. If demand is effectively released, prices are expected to gain new upward momentum; if demand remains weak, the market will be difficult to break free from its weak and volatile trend.

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