US melamine buyers accept large price hikes

10 July 2008 18:21  [Source: ICIS news]

WASHINGTON (ICIS news)--North American melamine buyers have accepted hefty price increases between 14.50-16.00 cents/lb for the third quarter, despite strong resistance to the initiatives due to soft downstream market conditions, sources said on Thursday.

The three leading melamine suppliers into North America had announced intentions of lifting prices by 15-16 cents/lb for contract business, effective on 1 July or as contracts allow, and had faced fervent opposition from buyers.

The nominations were driven by the unremitting rise in energy and feedstocks ammonia and urea costs, the need to restore margins, and a tight global market, according to the suppliers.

The two European suppliers also indicated that a weakening dollar and rising transportation costs had contributed to higher melamine prices in the Americas.

A majority of buyers will be seeing contract prices increase by 15 cents/lb as of 1 July, with some large customers able to arrange a slightly lower hike at 14.50 cents/lb and others accepting a more substantial increment of about 16 cents/lb, or $350/tonne, depending on the supplier and the contract terms. 

The increment takes melamine prices to record highs of $1.02-1.09/lb ($2,249-2,403/tonne, €1,439-1,538/tonne) for bulk business, according to global chemical market intelligence service ICIS pricing.

One of the melamine suppliers also confirmed that agreements had been reached with most South American buyers at a $350/tonne increment, which lifted July prices into South America to $2,100-2,150/tonne CFR (cost and freight) and above.

Melamine consumers underscored the difficulties in passing the higher feedstock costs to downstream segments.

Finished products manufacturers who use melamine have been trying to increase prices over the last several months and have been somewhat successful in a few segments, but the rising values were becoming more and more problematic to offset due to soft demand, sources explained.

Buyers felt that the increases achieved downstream were not keeping up with the increments upstream and said that they were falling behind the price curve.

Additionally, buyers said that there might be a point where manufacturers would not be able to afford the steep raw material costs and would have to curtail production. This would hurt the melamine business in the long run, buyers added.

“We can only pass so much of the increase to our customers, and melamine will hit a wall soon,” a buyer said.

Melamine consumers eventually gave in to suppliers’ price demands as there were few alternate sources of product available. 

“Negotiations are done and we did all the giving,” another frustrated buyer commented. “But there is only so much blood you can get from a stone, and we are on the verge of seeing a lot of production shut down,” the buyer added.

Global supplies of melamine are tight and demand is healthy, which provided support to the increase initiatives, according to suppliers. Recent output disruptions in China were seen as contributing to the generally snug market conditions.

Stocks at the supplier levels are lean because producers have run plants at slightly reduced rates to optimize the use of high-priced raw materials, sources added. 

With third-quarter negotiations having been concluded, buyers and sellers were starting to discuss possible price scenarios for the forth quarter, but it was too early to predict where prices might be headed, sources said.

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

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

($1 = €0.63)

To discuss issues facing the chemical industry go to ICIS connect

By: Gabriela Wheeler
+1 713 525 2600

< previous article(VIDEO - ICIS news Europe Lunchtime Bulletin 2 November 2009)

For the latest chemical news, data and analysis that directly impacts your business sign up for a free trial to ICIS news - the breaking online news service for the global chemical industry.

Get the facts and analysis behind the headlines from our market leading weekly magazine: sign up to a free trial to ICIS Chemical Business.

Printer Friendly