Market Overview:

This week, the melamine market showed a "stable and positive" trend. As of February 26, the benchmark price from SunSirs rose to 5,750.00 RMB/ton, an increase of 1.32% compared to the beginning of the month, successfully breaking through the 5,750 RMB/ton mark. The spot market also rebounded, reflecting improved regional transactions. This round of price increases was mainly driven by downstream restocking demand after the holiday, but deep-seated competition in the market remained intense.

Cost side:

The price of raw material urea has shifted from weak to strong, significantly enhancing cost support for melamine. With the start of spring planting and fertilizer preparation, the release of policies to ensure supply and stabilize prices, and boosted export expectations, urea prices have clearly risen, reaching a benchmark price of 1,830.00 RMB/ton as of February 26, an increase of 2.66% from the beginning of the month. This means that the current price increase of melamine is supported by both "cost-push" and "demand-pull" factors, a departure from the previous demand-driven pattern. However, urea enterprise inventories remain high at 1.176 million tons, and the pressure of inventory accumulation limits the potential for further price increases. Therefore, the strength of cost support for melamine still needs to be dynamically monitored.

Supply side:

The supply side exhibits a dual characteristic of "short-term orderly supply and long-term pressure."

Short term: In early February, the industry's capacity utilization rate was approximately 57.95%, with some companies experiencing tight supply and no significant pressure to secure orders.

Long term: The key variable is the successful commissioning of Xinjiang Xinji Energy's 120,000-ton-per-year plant on February 12th, marking the official entry of new capacity into the market. This will gradually increase market supply and intensify industry competition.

Fundamentals: The industry's long-term overcapacity situation remains unchanged, and any short-term demand-driven price increases are likely to be suppressed by ample supply.

Demand Side:

Downstream demand is showing a seasonal rebound. Following the Spring Festival holiday, industries such as plywood saw restocking demand, providing a short-term boost to the market. However, demand is moderate, with downstream buyers mostly purchasing on an as-needed basis, and no large-scale concentrated procurement has yet occurred. The export market is also stable. This round of demand is supported by a "short-term window of opportunity" rather than a strong, trend-driven recovery.

Market Outlook

In summary, the current market rally is driven by short-term demand, and its upside potential will be limited given the long-term overcapacity environment. The market is expected to maintain a stable to slightly stronger trend in the short term. However, if demand support weakens and supply increases, the market may face downward pressure.

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