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Melamine Prices Decline in China Amidst Sluggish Demand
Melamine Prices Decline in China Amidst Sluggish Demand

Melamine Prices Decline in China Amidst Sluggish Demand

  • 15-Mar-2024 5:39 PM
  • Journalist: Nina Jiang

Shanghai (China): Throughout February 2024, the Chinese Melamine market experienced a prolonged period of sluggishness, predominantly influenced by diminished demand from downstream laminate and other end-use sectors. The price of urea, a crucial raw material for Melamine production, also saw a decline owing to tepid demand from downstream agrochemical enterprises, compounded by subdued inventory levels in storage facilities. Furthermore, the Lunar New Year holiday in Asia exerted additional pressure on prices, resulting in reduced procurement activity within the market.

Melamine prices in China continued their downward trend, reflecting a bearish sentiment prevailing in the domestic market. This decline was exacerbated by an oversupply situation, with manufacturers contending with elevated inventory levels and subdued buying sentiments. Moreover, disruptions in overseas demand, such as issues in the Red Sea and staffing shortages, added to the market's challenges, further dampening market dynamics.

Consequently, the overall market sentiment remained bearish, with ample supply levels contributing to a significant reduction in Melamine prices. Additionally, the decrease in the price of Melamine can be attributed to low energy prices, particularly coal, which remained weak in February 2024. The focus on safety during the Spring Festival and slow resumption of coal mines, coupled with adverse weather conditions, led to average market supply, further reducing the production cost of Melamine. These factors collectively contributed to the decline in Melamine prices, given the significant role energy costs play in the production process. As of February 2024, the price of Melamine in the Chinese market stood at USD 947/MT FOB Qingdao, marking a 3.6% decrease from the previous month.

In the midst of the bearish market conditions, demand for Melamine remained sluggish, particularly from downstream laminate industries, which are closely tied to the construction sector. This slowdown can be attributed to the sluggish performance of the construction sector and low sales of apartments in February 2024. Despite the decline in Melamine prices, cautious purchasing behaviors persisted, fueled by uncertainties surrounding the economic outlook and challenges within the construction sector.

The slumping property market and weak consumer spending continue to be significant concerns in the domestic Chinese market. Property sales in mainland China experienced a tenth consecutive monthly decline in February, with lower demand during the Spring Festival holidays exacerbating the situation. Expectations suggest that the beleaguered sector's challenges will persist, compounded by low homebuyer confidence. Sentiment among homebuyers remains uncertain, with mounting evidence indicating increased consumer caution.

ChemAnalyst forecasts an increase in Melamine prices in the upcoming months due to anticipated improvements in demand from both overseas and domestic markets. This forecast is bolstered by the Chinese government's efforts to support the sector, indicating a positive outlook for Melamine prices in the near future.

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