This week, prices in the melamine market continued their downward trend. As of May 21, the benchmark price for melamine—as reported by SunSirs—stood at 6,150.00 RMB/ton; this represents a decline of 10.55% compared to the beginning of the month (6,875.00 RMB/ton). This consecutive series of price drops has dampened market sentiment, fostering a strong atmosphere of risk aversion and a "wait-and-see" attitude among participants.
The current fundamentals of melamine can be summarized in a single sentence: "High supply hangs overhead, weak demand drags from below, and low costs provide a floor."
Supply Side: Since May, the capacity utilization rate within the melamine industry has generally hovered between 60% and 63% (well above the breakeven point). Although some production units in regions such as Sichuan and Xinjiang have recently undergone brief shutdowns, overall output has recovered rapidly; operating rates are projected to edge up slightly to approximately 62% later this month.
On the demand side, key downstream sectors—such as board manufacturing, coatings, and furniture production—are currently facing widespread order shortages and low operating rates. Downstream players are generally "working through" their existing low-cost inventory; their procurement strategy is a typical "buy-as-needed" approach, characterized by extreme price sensitivity—they only dare to make small purchases when prices have dropped sharply, making it impossible for any concentrated wave of inventory restocking to materialize.
Cost Side: Raw Material Urea Drifts Lower. Urea serves as the primary feedstock for melamine; however, the urea market has recently been weighed down by sluggish domestic demand, resulting in a sustained weak downward trend. As of May 21, the benchmark price for urea—as tracked by SunSirs—stood at 1,782.50 RMB/ton, representing a decline of 4.93% compared to the beginning of the month (1,875.00 RMB/ton).
When Will the Decline Truly End?
The current market is in the midst of a fierce clash between "fundamentals seeking a bottom" and "technical indicators signaling an oversold condition." Given the extreme weakness in demand and the excessive supply, it is unlikely that prices will undergo an immediate, sharp "V-shaped" reversal. Fortunately, however, the cost side of the equation has not collapsed, and technical indicators are already signaling a severely oversold market.
Conclusion and Recommendations:
The market has entered the final stages of a "decelerating decline." We recommend halting any panic selling and adopting a wait-and-see approach. Closely monitor price movements and changes in moving averages over the next 2–3 trading days; should a "golden cross" in the moving averages or a pattern where "prices fail to breach new lows" emerge, consider selectively buying on dips.
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