14 January 2009 12:28 [Source: ICIS news]
By Madelon Ten Cate
LONDON (ICIS news)--Weak global demand has led to production cuts among all major European melamine producers which will result in significant reductions in first quarter contract prices, industry sources said on Wednesday.
One central European producer confirmed it was only running at 55% of its nameplate capacity, cutting its annual melamine production by approximately 70,000 tonnes.
“We will run at this reduced rate until the end of January at least. What will happen after that will mainly be decided by export numbers. I can say though, that global melamine demand is very weak, there is no exception on that,” the source said.
Two other producers also said they were running at reduced rates, with Polish producer Pulawy adding that it had shut down one line at the end of 2008, bringing down its annual production by 30%.
The seller estimated that global melamine output was now only at 50-60% of total capacity and added that in 2009 it could stay well below 1m tonnes.
“Compare this to an annual global capacity of 1.2m tonnes in 2007, and you see a reduction of 20% in two years time,” the seller said.
Buyers echoed the weak outlook. One European consumer said its own production lines were running at 70%, although the source added that he planned to take out normal contract volumes.
This was echoed by another consumer, who said he would take out normal quantities despite a “strong reduction of consumption”.
All players were uncertain what the year ahead would bring, although the majority agreed that the European market was long and that demand throughout 2009 was likely to remain weak due to the global economic downturn.
This was already reflected in first quarter contract negotiations, which were still ongoing. Reductions were likely but the extent was still uncertain.
The majority of producers have proposed decreases of €60-90/tonne, or in other words, a return to the price levels of the third quarter of 2008. But buyers were aiming for reductions of up to €300/tonne ($396/tonne), arguing that upstream costs had since plummeted and global demand for melamine remained especially weak.
Confirmation was received on some contracts. One buyer said it had agreed 50% of its contracts at a decrease of more than €300/tonne, or a contract price of below €1,100/tonne FD (free delivered) NWE (northwest Europe).
The consumer said, however, that it might have settled too early. “Current import levels are assessed at $1,000/tonne T1 CIF (cost, insurance, freight) European main port, which translates into free delivered prices of below €900/tonne”, the source said.
“With an average difference of approximately €100/tonne between European and Chinese values, I should be able to achieve prices of below €1,000/tonne for my remaining first quarter contracts.”
A producer also confirmed that it had settled one of its contracts at a 3-digit reduction, although the source did not want to specify what the actual level was.
Fourth quarter levels were agreed between €1,420-1,520/tonne FD NWE.
Spot levels were assessed at €1,000-1,100/tonne FD NWE by global chemical intelligence service ICIS pricing, while import levels were valued at $1,000-1,100/tonne T1 CIF European main port.
($1 = €0.76)
For more on melamine visit ICIS chemical intelligence
To discuss issues facing the chemical industry go to ICIS connect
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.
|ICIS news FREE TRIAL|
|Get access to breaking chemical news as it happens.|
|ICIS Global Petrochemical Index (IPEX)|
|ICIS Global Petrochemical Index (IPEX). Download the free tabular data and a chart of the historical index|