FocusAsia melamine may extend gains on rising production cost

21 September 2012 05:39  [Source: ICIS news]

By Samuel Wong

premium quality melamine – which is mostly produced in Japan and Europe – is used in the production of tableware and dinnerwareSINGAPORE (ICIS)--Spot offers for northeast Asian premium grade melamine are likely to increase in the near term, largely on higher production costs amid an increase in raw material prices, market players said on Friday.

Buyers, on the other hand, are expected to pose a strong resistance to higher prices given availability of cheaper cargoes from China and continued weakness in downstream demand.

On 19 September, melamine prices were assessed at $1,350-1,400/tonne (€1,040-1,078/tonne) CFR (costs and freight) SE (southeast) Asia, up by $50-70/tonne from 15 August, according to ICIS data.

Over the same period, export prices of melamine originating in China have remained stable at $1,180-1,220/tonne FOB (free on board) China, the data showed.

With the availability of lower-priced cargoes from China, there is no reason to buy cargoes offered at higher prices, a southeast Asia-based buyer said.

Melamine is largely used to make adhesive resins, which are used in wood panels for the construction of kitchen and bathroom cabinets and flooring.

Regular and premium Chinese melamine can be used for glue/adhesive usage, while premium quality melamine – which is mostly produced in Japan and Europe – is used in the production of tableware and dinnerware.

Market players said that premium grade melamine should command higher prices.

“Prices have to be increased because of higher costs and raw materials, and as we shift our attention to buyers who need such melamine goods,” a northeast Asia-based producer said.

Melamine production cost is tied with upstream naphtha, prices of which have recently surged because of tight supply.

Downstream demand for melamine, however, remains weak and is unlikely to support high prices, a southeast Asian buyer said.

Consumers are only purchasing on a need-to basis, unwilling to take the risk amid an uncertain market outlook, another buyer said.

Weak demand forces melamine facilities in northeast Asia to run at reduced capacity.

“The operating rates really depend on market conditions,” said a northeast-Asia based producer.

In Japan, Nissan Chemical Industries is currently running its 50,000 tonne/year melamine unit at Toyama at around 70-80% of capacity.

Mitsui Chemical is planning to shut its 40,000 tonne/year melamine plant at Osaka in October for a turnaround that is expected to last for 45-days.

($1 = €0.77)

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections
Request a free ICIS sample report for the latest prices and development in the Asian petrochemical markets

By: Samuel Wong

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