This week, the melamine market was affected by the geopolitical events in the Strait of Hormuz and the combined effect of domestic spring planting demand, resulting in a rapid price increase. The market was characterized by cost-driven pricing, tight supply and demand, and high-level fluctuations, making it a strong performer in the chemical sector.
I. Market Performance
As of March 4th, the benchmark price of melamine on SunSirs was 6,150 RMB/ton, a weekly increase of 3.02% and a cumulative increase of 4.05% over the past 5 days, reaching a high level for the year. Major domestic factories raised their quotations by 50-350 RMB/ton. Spot market supply was tight, manufacturers had ample orders to fulfill, and the transaction focus steadily shifted upwards. Downstream industries such as wood-based panels and adhesives followed suit as needed, demonstrating strong demand-side capacity.
II. Core Drivers
The obstruction of passage through the Strait of Hormuz has restricted Iranian methanol exports. China relies on the Middle East for 60% of its imported methanol, and the daily price increase of methanol spot prices exceeded 7%, directly pushing up urea production costs. As a core raw material for melamine, urea prices in major producing areas have increased to 1,800-1,870 RMB/ton, forming a cost transmission chain from methanol to urea to melamine, providing strong support for melamine prices. Simultaneously, rising crude oil and shipping costs further increased the overall cost center of the chemical industry chain.
Supply and demand fundamentals support:
1. Supply side: The industry's operating rate remained at 55%-60%. Some plants had not fully recovered from maintenance after the Spring Festival, and the release of new capacity was slow. The market spot supply was limited, and manufacturers were increasingly reluctant to sell.
2. Demand Side: Following the holiday, the sheet metal and molding compound industries fully resumed operations. Spring planting and fertilizer preparation drove peak demand for urea, and downstream restocking demand was released. Essential demand supported the market, and there was no significant pressure to accumulate inventory.
Double support from costs and sentiment
The peak season for urea planting in spring had not yet subsided, coupled with the geopolitical premium of methanol, the cost of melamine continued to strengthen; the market was bullish, and traders were moderately stocking up, further pushing up prices, forming a positive cycle of "rising costs → rising prices → increased transactions".
III. Market Risks
The market's upward trend remained constrained by multiple factors: the overcapacity of melamine production capacity in China remained unchanged, and the resumption of production at subsequent plants and the commissioning of new capacity will suppress price increases; downstream demand for wood-based panels was recovering moderately, and high prices may trigger resistance; if the Strait of Hormuz resumes shipping, a decline in methanol prices will weaken cost support; at the same time, urea is subject to supply and price controls, which also indirectly limits the upside potential of melamine.
IV. Market Trend Forecast
Short-term (early to mid-March): High-level fluctuations with a slight upward bias, price range 6,100-6,400 RMB/ton. Geopolitical premiums persist, urea spring planting provides support, and tight supply will lead to continued price increases, but the rate of increase will narrow.
Mid-term (late March - April): Gradually peaking and declining. Spring planting demand wanes, urea prices weaken, and supply rebounds, reducing cost support. Prices return to fundamentals, and the fluctuation range shifts downward to 5,800-6,100 RMB/ton.
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