12 October 2009 00:00 [Source: ICB]
Melamine is used to make molding powder that is used in dinner ware, coatings in cars, fan coils and appliances.
Other uses include adhesive resins, which are used for making wood panels for construction of kitchens, bathrooms, furniture and flooring. The construction and automotive industries are strong growth drivers for melamine.
Demand for melamine has been fragile throughout the year, with end-markets not yet showing much certainty in recovery, according to global market intelligence service ICIS pricing.
Stocks have been low, but downstream demand in September was assessed to have increased from the summer months. Demand in the wood-based panel industry was on the road to recovery, while raw material costs were increasing, particularly for natural gas and ammonia, ICIS pricing noted.
Discussions between sellers and buyers are expected to continue well into October before a market consensus would be reached.
In addition, both buyers and sellers expressed concern about an additional 30,000 tonnes/year of melamine production that will begin coming into the North American market in the first quarter (Q1) of 2010.
The new capacity would come from US methanol supplier Southern Chemical, which has a new plant in Trinidad for producing melamine. Another 30,000 tonnes of production from this plant is expected to be directed to the European market, said ICIS pricing.
The North American melamine market was stable, with sellers and buyers vigorously engaged in discussions for Q4 pricing, said ICIS pricing, citing sources during the week ended September 30.
In mid-September, US specialty chemical producer Cytec Industries announced a 6 cent/lb ($132/tonne) price increase for Q4, effective October 1. In the week ended September 30, Cytec and other producers were still pressing forward with the increase.
However, buyers protested that an increase of that magnitude (9%) was unjustified, considering that demand had not yet returned to prerecession levels.
Melamine buyers in North America said a price increase for Q4 2009 was unwarranted because the market appeared to have adequate supply to meet demand. Although demand had picked up slightly in September, it was nowhere near enough to warrant this price hike, some said.
However, margins for melamine need to be restored, one producer has said.
Meanwhile, prices for feedstock urea firmed slightly during the week ended September 30, with prices in the US Gulf quoted at $258-265/short ton (€175-179/short ton) FOB, according to ICIS pricing.
Negotiations in Q3 were difficult and competitive, with prices down up to $200/tonne from Q2. Melamine prices for Q3 were assessed in a range of approximately 79-88 cents/lb ($1,744.30-1,936.98/tonne), according ICIS pricing.
In comparison, the price range quoted in Q3 2008 was $2,259.74-2,414.06/tonne.
Melamine is produced by heating urea, ammonia (NH3) and carbon monoxide. The resulting mixture of isocyanic and ammonia are reacted with a solid catalyst at about 400˚C (752˚F).
In the high-pressure process, which is carried out in the liquid phase without a catalyst, melamine is manufactured by heating dicyandiamide under pressure. Its most important reaction is that with formaldehyde, forming resinous compounds of high molecular weight.
The economic outlook for melamine is uncertain. It is expected that this year's Q3 will have seen higher demand for melamine in the Americas than in Q1 and Q2.
All melamine applications were expected to improve in the coming months, with some melamine sources citing auto coatings as a category of growth now that auto-makers are returning some plants to production. Meanwhile, melamine users in South America have returned to the market, but it was not known whether this was actual new demand or merely stock refilling.
One industry source said the laminates market in North America was picking up as a result of homeowners receiving government incentives to remodel, for example in Canada.
US MELAMINE CAPACITY '000 TONNES/YEAR
Capacity Cytec Industries
80* *Additional 30,000 tonnes/year expected to enter North American market in Q1, 2010 from Southern Chemical SOURCE: ICIS PLANTS & PROJECTS
Profile (Europe) last published December 1, 2008
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