US melamine seen to tighten after China quake

14 May 2008 23:11  [Source: ICIS news]

WASHINGTON (ICIS news)--The North American melamine market would be tightened by the production outages in China following Monday's massive earthquake, and possibly send local prices up in due course, sources said on Wednesday.

Shortages would certainly impact global melamine prices, and to some degree US availability in coming weeks, the sources said.

"I don’t know what exactly may happen this quarter or next quarter, but I am sure something will happen to prices," a US producer said on condition of anonymity.

The producer added: "Melamine has turned into a commodity and when product becomes tight, prices go wild."

The US market does not rely heavily on Chinese imports, with only about 4-5% of local demand being filled by Chinese product, industry sources said.

Any direct effect of reduced Chinese exports would be delayed, as material due to arrive in the US in the next few weeks was already on the water, the sources noted.

But the Chinese outages could exacerbate tightness in the market in Europe, where Chinese product is widely used.

European suppliers might have to redirect some of the product typically shipped to the US to cover shortages in Asia and Europe, the sources said.

The US market has tightened considerably over the last couple of months, and given the snug conditions there was little domestic product available to cover for shortages.

The US melamine producer said that his plant was already running at full capacity. Most of its output was committed to domestic contractual obligations, with no sizeable cargoes available for spot sales, the producer said.

Talk had already been heard in the US market about potential price hikes in the third quarter due to rising feedstock costs and a tight supply. The aftermath of the Chinese earthquake could exert further upward pressure on prices.

North American melamine bulk contracts for the second quarter settled up 5-6 cents/lb at 88.00-93.50 cents/lb, according to data from global chemical market intelligence service ICIS pricing.

Cytec Industries, DSM and Agrolinz Melamine International (AMI) are among the major suppliers of melamine in North America.

Hexion, Arclin, Raytor, Georgia Pacific, Tembec and Wilsonart are among the main buyers.

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For more on melamine visit ICIS chemical intelligence

By: Gabriela Wheeler
+1 713 525 2600

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