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Sluggish Demand Downs Melamine Prices in China
Sluggish Demand Downs Melamine Prices in China

Sluggish Demand Downs Melamine Prices in China

  • 06-May-2024 3:07 PM
  • Journalist: Rene Swann

Qingdao (China): In April 2024, China's domestic Melamine market witnessed a decline in prices, echoing subdued demand from various downstream sectors like laminate, furniture, and coatings, which are affected by a slowdown in construction activities. This downward trend has persisted for the past three months, exacerbated by ongoing challenges in China's real estate market, notably marked by a significant drop in home sales.

Preliminary data from the China Real Estate Information Corp. indicated a sharp 46% decrease in the value of new-home sales compared to the previous year, following a 60% decline in February. Negotiations in the Melamine market gravitated towards lower levels due to weak demand, reflecting a broader decline in profitability, such as the 12.9% net profit drop reported by Chinese producer Sinopec for 2023, attributed to falling product prices and operational losses in the chemical sector. Amidst this downturn, some companies offered discounts on sales, altering the landscape of negotiations in the Melamine market and leading to reduced market activity.

Market participants remained cautious as indicators like home buying, financing, and construction starts continued to falter, contributing to an atmosphere of uncertainty. Despite these challenges, the Chinese government implemented measures to stimulate growth in the construction sector, including a significant reduction in benchmark mortgage rates, aiming to bolster the economy amidst real estate difficulties. Consequently, China's manufacturing sector exhibited signs of improvement in April. However, despite these modest gains, the Chinese real estate market remains besieged by challenges. Meanwhile, the decline in feedstock urea and coal prices further reduced the production cost of Melamine, adding to the market's complexities.

The recent downturn in the Melamine market is primarily attributed to weakened demand and insufficient cost support. Across the domestic market, performance was lackluster, with export orders gradually diminishing, resulting in reduced demand from downstream sectors like laminate, furniture, and coatings. Negotiations within the Melamine market trended downwards due to weakened demand, resulting in decreased interest in spot goods. Furthermore, Sinopec's notable decrease in net profit for 2023, attributed to lower product prices and operational losses in the chemical sector, exacerbated the challenges faced by the Melamine market, intensifying overall market conditions.

As of April 2024, the assessed price for Melamine stood at USD 882/MT FOB-Qingdao, reflecting a substantial 5.1% decrease from the previous month.

ChemAnalyst anticipates an upward trajectory in Melamine prices over the coming months, driven by expected improvements in demand from both domestic and international markets. This forecast is supported by the Chinese government's efforts to strengthen the construction sector, signaling positive prospects for Melamine prices in the short term. The projected price hike aligns with the likely increase in demand across diverse industries, encompassing construction, laminate, furniture, and adhesives.

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