Price trend:

Recently, the melamine market has shown a "firm" pattern, with strong supply supporting prices while demand limits upward movement. As of December 8th, the SunSirs's benchmark price for melamine was 5,637.50 RMB/ton, a 0.67% increase compared to the beginning of the month (5,600.00 RMB/ton).

Behind the "robust performance" lay a complex interplay of multiple factors, including supply and demand and costs:

Supply Side:

Recent supply had indeed been contracting. The concentrated shutdowns of production facilities had led to a decrease in the overall industry capacity utilization rate, from 62.20% at the end of November to 60.80%, resulting in reduced market supply. At the same time, some manufacturers had sufficient outstanding orders and low inventory levels, giving them the confidence to maintain or even raise their prices.

Demand Side:

Overall performance was lackluster. Major downstream industries, such as artificial board manufacturing, were affected by the real estate market, and demand did not fundamentally improve. As prices rose, downstream buyers showed significant resistance to higher-priced goods, leading to a slowdown in new orders for manufacturers. This was the fundamental reason why the price increase was unsustainable.

Cost side:

The price of urea, a raw material, showed an upward trend in early December. As of December 8th, the benchmark price of urea according to SunSirs was 1,717.50 RMB/ton, a 3.62% increase compared to the beginning of the month (1,657.50 RMB/ton). This provided strong cost support for melamine prices.

Short-term market outlook

Overall, the short-term market direction will depend on the interplay of the following two factors:

Upside potential: If the market for urea raw materials continues to improve, and companies maintain low inventory levels and a strong willingness to support prices, there is an expectation that market prices (especially at the lower end) will continue to rise.

Downward pressure:  Since this price increase was primarily driven by short-term supply-side factors, demand did not provide a solid foundation. Once supply recovers or downstream resistance intensifies, the momentum for further price increases will weaken significantly, and the market may enter a period of high-level consolidation or even a narrow correction.

If you have any inquiries or purchasing needs, please feel free to contact SunSirs with support@sunsirs.com.