SunSirs: Melamine Manufacturers' Inventories Show an Accumulation Trend

The melamine market weakened again this week. Most companies' quotations today fell by 50-100 RMB/ton or the actual transaction space increased. On June 5, the benchmark price of melamine in SunSirs was 5937.50 RMB/ton, down -0.21% from the beginning of this month (5950.00 RMB/ton). Some companies have low-end prices. The main reason for the decline in the melamine market is still supply, demand, and raw material costs.

Supply:

After running at a low level in mid-to-late April, the melamine capacity utilization rate climbed to a high level in mid-May as the unit restarted. Although some companies stopped for maintenance in late May, resulting in a decline in the operating rate, the spot supply in the market is still significantly higher than the previous level. The continued loose supply was transmitted to early June, and the sales pressure of manufacturers intensified, and the inventory of manufacturers showed an accumulation trend.

Demand:

The domestic terminal market has been in a weak predicament this year. By the middle of the year, the signs of recovery in the downstream are still weak. According to relevant statistics, the order scale of downstream industries has shrunk significantly, reaching only 20%-35% of the same period last year, and enterprises generally adopt a cautious strategy of production according to orders. This weakness on the demand side is transmitted to the upstream, so that the purchase of melamine is limited to meeting rigid demand, and lacks a strong driving effect on the overall market.

Cost:

The urea market continues to consolidate. The factory side tentatively raises prices after the delivery of low-priced orders, but the follow-up of new orders is weak, and the market trading heat cools down. The current supply is sufficient (daily output of 205,600 tons, operating rate of 87.23%), and although the demand side benefits from the summer fertilizer cycle, the sales of compound fertilizers have shown marginal improvement, but the overall support is limited. The market is skeptical about the sustainability of demand and has a strong wait-and-see sentiment.

As of June 5, the benchmark price of urea in SunSirs was 1,898.00 RMB/ton, up 0.32% from the beginning of this month (1,892.00 RMB/ton).

In summary, the current melamine market is facing many negative factors: weak terminal demand suppresses the supply and demand balance, expectations on the raw material side weaken, and coupled with the generally bearish mentality of the industry, prices are likely to further bottom out.

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