US melamine buyers resist price hikes

19 September 2008 17:59  [Source: ICIS news]

WASHINGTON (ICIS news)--North American melamine buyers continue to resist recently proposed increases for the fourth quarter (Q4) due to soft downstream market conditions, sources said on Friday.

Producers have announced 18-20 cent/lb ($397-441/tonne, €278-309/tonne) increases for Q4 contract business based on the rise of natural gas, ammonia and urea prices over the last several months, together with tight global supplies.

Buyers said that an increase of that magnitude was difficult to absorb, particularly after a hefty 14.50-16.00 cent/lb hike was implemented in the third quarter.

The higher raw material costs were not easy to recover from downstream applications given soft market fundamentals, sources added.

Weak conditions in the housing industry, together with fresh concerns regarding the health of the US economy, have resulted in lacklustre consumer demand for finished products such as laminates, melamine buyers said.

“We just can’t afford this increase,” a large buyer said, “our industry as a whole can’t afford it. Demand from some of the applications is just not there. We’re regrouping within our company and are looking at other alternatives,” the buyer added.

Several buyers said that they had received competitive offers from traders eager to place Chinese melamine into the North American market.

“We are getting a lot of offers from China these days,” another buyer said, “and they are at least 10 cents/lb below what the domestic suppliers are asking.”

Operating rates at Chinese melamine plants have increased in September, following a government-mandated reduction during the Beijing Olympics, while demand in that country remained soft. The surplus material was being offered in Europe and North America at attractive levels.

However, some North American buyers cannot rely on imports due to quality issues and the timing of shipments. Other buyers are opting for a diversified group of suppliers, and some are not buying imports at all, sources added.

There have been some supply issues within the US as recent production shutdowns and steady demand have resulted in a strained market situation.

US producer Cytec Industries declared force majeure (FM) on melamine supplies following the shutdown of its Fortier complex in Louisiana during Hurricane Gustav in early September. Melamine customers remained on allocation, and this situation was expected to last throughout the month.

While some consumers experienced a slight shipment delay, others said they had been able to continue production by using existing melamine stocks and carefully managing product availability.

Discussions regarding Q4 contract prices were anticipated to continue for some time, sources said, as many buyers were determined to fight the proposed hikes.

Domestic melamine prices were assessed at 102.50-109.50 cents/lb 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 Specialty Chemicals, Coveright, Arclin, Raytor, Georgia Pacific, Tembec and Wilsonart are among the main buyers.

($1 = €0.70)

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By: Gabriela Wheeler
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