Europe melamine producers target Q4 hikes of €80-100/tonne

09 September 2009 13:57  [Source: ICIS news]

LONDON (ICIS news)--European melamine producers are targeting price increases of €80-100/tonne ($116-145/tonne) for fourth-quarter contracts as demand has picked up amid a tight market and expectations of rising feedstock costs, market sources said on Wednesday.

“I will be looking for a minimum increase of €80/tonne,” one producer said.

Another producer said: “We need to exceed what was lost in the third quarter, so I will announce a hike of more than €100/tonne.”

Melamine producers said they suffered significant margin losses during the year.

Melamine contract prices have fallen by more than €600/tonne since the end of 2008 as the global economic crisis hit, according to data from global chemical market intelligence service ICIS pricing.

“The losses are unsustainable for everybody. We need to improve our margins,” a third producer said.

Players agreed that the market had tightened during the year after producers cut back production in line with weaker demand.

One source said European operating rates during the first half of the year did not exceed 70%.

Even though the majority of sources agreed that supply was reduced, at least for prompt delivery, one buyer said that the tightness was only artificial as producers could easily increase their operating rates.

Producers agreed that upstream costs were also likely to increase, as natural gas values traditionally rise during the winter season.

Several buyers, on the other hand, argued that urea costs actually lost value during August, making producers’ reasoning unfair. 

Another major factor in market sentiment was the lack of imports, particularly from China, sources said.

European values were the lowest globally, which meant it was now purely a “European game”, according to one of the sellers.

“It is unacceptable for European prices to be below Asian prices,” the source said, adding that even Chinese values were expected to go up in the coming quarter.

“There is enough room for domestic price improvements while still keeping this a European game,” the seller said.

Buyers did not seem too troubled by the proposed increases. One consumer said it could only agree to a rollover, as little had changed since third-quarter prices were agreed.

Another buyer said an increase of €20/tonne would be the maximum, saying the market could be tight, while adding that upstream urea levels had fallen by more than $40/tonne in August.

One other consumer said: “If you look at negotiations earlier in the year, a difference of €100/tonne between buyers’ and sellers’ price ideas is not even that much.”

Third-quarter contracts were agreed at €800-900/tonne FD (free delivered) NWE (northwest Europe). 

Negotiations for the fourth quarter were expected to begin at the end of September.

($1 = €0.69)

For more on melamine visit ICIS chemical intelligence
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By: Madelon Ten Cate
+44 20 8652 3214

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