Price & market trends: Asia melamine may extend gains on rising production costs

28 September 2012 10:25  [Source: ICB]

Rising production costs as a result of higher raw material prices will probably push spot prices up further

Spot offers for Northeast (NE) Asian premium grade melamine are likely to increase in the near term, largely on higher production costs amid an increase in raw material prices.

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.

In same period, export prices of melamine from China have remained stable at $1,180-1,220/tonne FOB (free on board) China.

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

Melamine is largely used to make adhesive resins, used in wood panels for kitchen and bathroom cabinets and flooring.

Regular and premium Chinese melamine can be used for glue/adhesive usage, while premium quality melamine - mostly produced in Japan and Europe - is used to make 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.

Production cost is tied to upstream naphtha, prices for which have surged on tight supply.

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

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

By: Samuel Wong

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