30 April 2012 00:00 [Source: ICB]
Melamine is used to make a molding powder that has many uses, from making dinnerware and automotive parts to buttons and appliances.
Demand for melamine in the first half of 2012 has been stable from the first half of the prior year as downstream markets are slow to recover from the recent recession.
While a stalled US construction industry dampens demand for melamine, a rapidly recovering automotive industry has kept demand in near balance with supply. Demand from the wood-based panel industry has been tepid as construction activity for homes and commercial projects remains far off the pre-recession pace of 2007.
Despite the slow demand recovery reported by melamine buyers, producers say North American supply is tight despite an induction into the market of a potential 30,000 tonnes/year from Methanol Holdings Trinidad's 60,000 tonne/year plant.
Melamine imports to the US from China have decreased in early 2012 as demand for melamine in Asia has increased while production has been constrained. In February 2012, the US imported 350 tonnes of melamine from China, compared with 1,524 tonnes in February a year ago.
Melamine from Europe has been readily available to US buyers in recent months as demand in Europe has fallen. In February 2012, the US imported 700 tonnes from the Netherlands, compared with 82 tonnes in the same month of 2011.
The North America melamine market has been stable with contract prices for melamine little changed in the second quarter of 2012 from the first quarter. Cornerstone Chemical, the only North American melamine producer, according to sources, settled some second-quarter contracts at a rollover from the first quarter and others at decreases of 1 or 2 cents/lb.
Buyers said they have reduced their expectations for melamine demand because of somnolent markets for building materials, furniture and composite wood products.
US melamine prices for the 2012 second quarter are in a range of 84.50-97.50 cents/lb ($1,863-2,149/tonne, €1,416-1,633/tonne), as assessed by ICIS.
Meanwhile, supplier margins are being squeezed by rising costs for upstream ammonia and urea. Urea prices soared in the first and second quarters of 2012 as strong demand from the agricultural sector powered urea prices to levels above the 2008 spike.
In the week ended April 20, the US urea market began to soften as purchasing for spring application was coming to an end and imports increased.
Urea barge prices began to soften as more product arrived into the country. Prompt barges were still heard around the $700/short ton FOB (free on board) level, with up to $710/short ton FOB Nola (New Orleans) having traded late in the week ended April 13.
First-half May barges are trading at a discount, with business heard in the $610-625/short ton FOB Nola range. All May prices are at lower levels, with barge trades heard at $527-530/short ton FOB Nola.
On the paper market, May prices are indicated in the $520-530/short ton FOB Nola range, with June dropping into the $440-450/short ton FOB range.
According to data from the US Department of Agriculture (USDA), urea imports in February totalled 536,864 short tons, up by 8.7% from February 2011 when 493,798 short tons were imported. July 2011-February 2012 imports reached 4.18m short tons, down by 11% on the same period a year earlier.
Meanwhile, the US ammonia market is steady with higher prices coming in May, sources said during the week ended April 20.
Discussions for the May contract price in Tampa were expected to get underway at the end of the following week. Expectations are for an increase from the current $470/tonne CFR (cost & freight), with some talk in the $550-560/tonne CFR range.
Melamine is produced by heating urea, ammonia and carbon monoxide. The resulting mixture of isocyanic and ammonia are reacted with a solid catalyst at about 400e_SDgrC (752e_SDgrF).
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 in the near term calls for mild improvement in demand as downstream markets are awakened by increasing construction activity. As demand improves, suppliers should be able to increase prices and return margins to sustainable levels.
Melamine supplies are projected to remain tight as production remains limited and demand builds.
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