FocusMelamine to hit $1,700/tonne CFR Asia

25 April 2008 04:40  [Source: ICIS news]

By Helen Yan

SINGAPORE (ICIS news)--Melamine prices are poised to hit $1,700/tonne CFR (cost and freight) Asia in the second quarter due to a spike in feedstock urea values after a near quadrupling in China’s urea export tax, producers and traders said on Friday.

Urea spot prices have surged by more than $100/tonne to surpass $500/tonne FOB (free on board) Yuzhny - the key Black Sea urea benchmark in the international market.

Chinese urea exports, meanwhile, are anticipated to soar to more than $700/tonne FOB China, given reduced availability.

This has spurred some Chinese melamine producers to hike spot offers by more than $50/tonne to $1,550/tonne FOB China for April shipments and $1,600/tonne for May loadings.

Japanese and European melamine producers were also quick to follow suit, raising offers by $50/tonne to $1,650/tonne CFR Asia for May shipments and $1,700/tonne for June loadings.

A major Japanese melamine producer has also announced a hefty $100/tonne hike for its third quarter contracts to $1,700-1,750/tonne, even though it is still too early to start contract discussions for that quarter.

“We have no choice but to increase our third quarter contract price as our margins have been wiped out by rising upstream crude, naphtha and feedstock urea costs,” the producer said,

He added that the firm has also been hard pressed by the slowdown in the housing sector in Japan.

NYMEX crude has surpassed $119/bbl, lifting naphtha to $980/tonne CFR Japan. Japan is a major importer of crude and naphtha.

The soaring feedstock urea price has also prompted some producers to focus instead on their domestic markets or cut down operating rates.

“The urea feedstock price is expected to rise sharply to more than $700/tonne FOB China in view of the huge spike in the export tax, and this is giving us a big headache as it will push up our costs of production significantly,” a Taiwanese melamine producer said.

He added that the company might consider either reducing operating rates if it could not secure lower-priced urea from elsewhere.

The Chinese government hiked the export tax for all chemical fertilizers, including urea, to 135% from 35% previously, effective 20 April and 30 September.

This was a bid to curtail the fertilizer export trades to ensure sufficient domestic supply, given concerns over inflationary pressures on food prices.

Melamine is used in decorative surface laminates and adhesives in the manufacturing of wood-based panels as well as in the production of tableware.

($1 = €0.64)

For more on melamine visit ICIS chemical intelligence.

By: Helen Yan
+65 6780 4359

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