US melamine buyers brace for hefty increases

28 May 2008 21:19  [Source: ICIS news]

WASHINGTON (ICIS news)--North American melamine buyers were bracing for hefty price increases for the third quarter due to escalating feedstock costs and tightening global supplies, sources said on Wednesday.

US producer Cytec Industries announced that the company’s melamine list prices would increase by 15 cents/lb ($330/tonne), effective on 1 June, or as contracts allow. The increase would effectively be implemented on all Q3 business.

The company cited a tight global supply/demand balance as contributing to the increase.

European supplier DSM Melamine and affiliated companies DSM Melamine Americas and PT DSM Kaltim Melamine announced a global price increase of $300-400/tonne (€192-256/tonne) for all of its grades of melamine, with immediate effect for spot business or as contracts allow.

The company said that significant changes in global supply/demand dynamics of melamine, including its upstream markets, together with a need to restore production margins, were the main drivers for the price increase.

DSM added that there wasthe possibility that further pricing action would be necessary during the third quarter, depending on the global conditions of the market.

Aside from a tight supply/demand ratio in North America, recent melamine outages in China following the massive earthquake two weeks ago were said to be contributing to a further global tightening of availabilities.

Buyers said they expected producers to target price increases for the third quarter but they did not anticipate such substantial nominations.

“I had built an increase into Q3 calculations, but definitely not such a high one,” a large melamine buyer said.

Consumers said that the prices were difficult to absorb given soft downstream market conditions.

“There have been melamine price increases in Q1 and Q2, and another increase of this magnitude is hard to pass along the supply chain. What will happen is that melamine consumers will start to shut down production,” the buyer added.

Domestic melamine prices were assessed at 88.00-93.50 cents/lb ($1,940-2,061/tonne) in bulk, according to 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.

($1 = €0.64)

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By: Gabriela Wheeler
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