Europe Q4 melamine contracts confirmed at €900-1,050/tonne

28 October 2009 23:59  [Source: ICIS news]

LONDON (ICIS news)--European fourth-quarter melamine contracts have settled at €900-1,050/tonne ($1,324-1,544/tonne), reflecting an increase of €100-150/tonne from the third quarter, sources said on Wednesday.

Sellers had originally been looking for increases of €80-110/tonne, reasoning that they needed to recover margins that were lost earlier in the year.

But a pick-up in domestic demand and a lack of imported goods into the region had turned the market tight, most sources said.

Although many insiders reported fourth-quarter prices between €870-1,200/tonne, which reflected only smaller increases of €50-110/tonne, the majority of canvassed sources agreed that real fourth-quarter numbers were between €900-1,050/tonne.

“I have settled all my contracts at increases of around €85/tonne,” a consumer said. “Depending on location, my contracts were concluded in the low to high €900s/tonne.”

A seller said: “I have settled at an average increase of €95/tonne, and the hike was mainly based on the recovery of margins, not even the recent tightness on the market.”

The wide disparity of numbers was mainly caused by a lack of supply in the market, which left smaller customers to pay premiums for their material, sources said.

Several customers also said that the size of the increase depended on the levels that were agreed in the third quarter.

“I do not need extra stock, my inventories are full,” a consumer said, adding that its real values for the fourth quarter were only at €870/tonne.

Downstream demand seemed to be improving in the fourth quarter, according to sources, although it was still unclear if this was simply due to restocking inventories or an actual increase in buying interest from downstream consumer markets.

“It remains to be seen if this pick-up in demand is only caused by the pipeline effect, or whether downstream markets are truly performing better than before,” a seller said.

Spot material, meanwhile, remained scarcely available, according to most sources.

Several producers said they had no additional material left to sell on an ad-hoc basis, while several customers confirmed they had ordered more volumes in the fourth quarter than they needed in the third quarter.

There were still no imports recorded, however one trader confirmed it had offered Chinese material to the market at $1,240/tonne (€843/tonne) on a T1 CIF (cost, insurance, freight) basis, which was rejected on the basis that it was too high.

Although the same source said that €900/tonne on a free delivered (FD) basis was also on the high side, it was difficult to assess spot values as no physical trades were reported.

Most market participants said they were hopeful that the positive sentiment would continue into the New Year.

Two producers said that price increases were to be expected in the first quarter of 2010 due to increased demand and anticipated higher upstream costs.

“I keep on receiving requests from customers that never buy from me,” a seller said. “This is a very good sign for the New Year ahead.”

European melamine contracts are agreed on a free delivered (FD) northwest Europe (NWE) basis.

($1 = €0.68)

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By: Madelon Ten Cate
+44 20 8652 3214

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