FocusAsia’s melamine price outlook uncertain on weak demand

31 May 2012 06:01  [Source: ICIS news]

By Yu Guo

Asia’s melamine price outlook uncertain on weak demandSINGAPORE (ICIS)--The near-term outlook for Asian melamine spot prices remains uncertain on the back of constantly weak demand from the downstream plywood and tableware sectors, according to industry sources on Thursday.

Although the range of spot prices widened to $1,300-1,370/tonne (€1,040-10,96/tonne) on 30 May from its 28-month low of $1,300-1,350/tonne CFR (cost & freight) northeast (NE) Asia and/or southeast (SE) Asia two weeks ago, players remained cautious and no bulk purchases were made during the past two weeks.

“No one wishes to stock up at this point of time and buying resistance at the current price level is still pretty strong,” said a China-based trader.

Major producers remain optimistic over the near-term outlook, citing the prevailing low operating rates and high feedstock urea prices.

“Supply has been getting tighter regionally because most producers have been running their plants at reduced rates,” said a Japanese producer.

Another producer said: “Even though the downstream sector is slow, [spot demand] is there. Given the current feedstock urea prices, sellers will have to achieve $1,500/tonne for their melamine spot cargoes in order to obtain some margins.”

Market sources in China said urea prices were at around $480/tonne FOB (free on board) China on 30 May.

Regionally, major Japanese producers have been running their melamine units at 70-80% of capacity, with a major producer planning a 45-day turnaround in late June.

Major Chinese producers have been running their melamine plants at 40-60% of capacity in the past quarter, citing constantly squeezed margins.

On the other hand, buyers were in no hurry to purchase anything in bulk because of ample inventories.

“We do not wish to buy anything at the moment as our inventory covers the production all the way up to August,” said a major end-user in southeast Asia.

“Even though producers are trying to lift their offers, it is very unlikely for buyers or end-users to rush into the spot market given the current weak demand,” the end-user added.

Another southeast Asian buyer said: “Buyers are not very active in the spot market now. Some buyers will simply choose to fulfil their contractual volume negotiated previously rather than entering the spot market to make any purchases.”

Going forward, the Chinese melamine price trend will remain an important indicator in the Asian market, said a Japanese producer.

“The biggest concern in the melamine spot market will still be centring around supply-demand mechanism in China, given its close to 300,000 tonnes of new capacity expected in 2012,” the Japanese producer added.

Melamine is used in the construction industry in the production of coatings, laminates and flame retardants. It is also used to manufacture adhesive resins, which are used to make wood panels to build kitchens, bathrooms, furniture and flooring.

($1 = €0.80)

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections

By: Yu Guo
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