US educational cuts likely to hurt melamine market - source

03 March 2011 22:22  [Source: ICIS news]

By Frank Zaworski

HOUSTON (ICIS)--Major cutbacks for education and other government spending in the US are having a negative affect on the melamine market, a source said on Thursday.

Melamine is an important component used in the manufacture of school and other institutional furniture. When sales of school furniture decrease, the demand for melamine from that niche market drops accordingly.

"Sales of school desks and related furniture fell in 2010, and are continuing to fall in 2011," said one furniture manufacturer. "Therefore, we are not buying as much melamine as we needed in the past."

The financial support for education at national, state and local levels has eroded in recent years as property values fell, tax collections dropped and support for government spending of all kinds sank.

The US House of Representatives, for example, has passed a continuing resolution for the remainder of fiscal year 2011 that would slash education funding.

School improvement grants, for example, would be cut by $337m (€243m), Title I programmes would be cut by $694m and the Head Start program would be trimmed by over $1bn, according to the American Association of School Administrators (AASA).

These cuts would also result in the loss of about 40,000 jobs, the AASA said.

In Texas, the first draft of a state education budget for the 2011-2012 school year would cut public school funding by more than $9bn from the 2010-2011 year.

The Houston Independent School District (HISD) estimates that if the Texas education budget receives legislative approval, Houston schools would lose $202m-348m in yearly funding.

Anything not related to teaching the core subjects of math, science and social studies would be on the chopping block as principals decide how to spend limited funds, HISD said.

As the US economy crawls out of a recession and money for education returns to the coffers, funds for new schools, new furniture, or even replacement furniture could be hard to come by.

US office furniture production in 2010 was valued at $8.3bn, down by 38% from a peak of $13.3bn in 2000, according to the Business and Institutional Furniture Manufacturer's Association (BIFMA).

Markets for melamine and melamine resins in other markets for furniture, wood flooring and industrial coatings have rebounded somewhat over the past year to near early-2008 levels, industry sources said.

Wood flooring and other composite wood materials have been selling well lately, as home remodeling has become an attractive alternative in a tough real estate market.

Sales of melamine resins used in the automotive industry are also on the rise as automobile sales increase, according to sources.

($1 = €0.72)

By: Frank Zaworski
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