Europe Q4 melamine contracts settle up €200/tonne on tight supply

11 October 2012 12:16  [Source: ICIS news]

LONDON (ICIS)--Fourth-quarter European melamine contract prices have risen by €200/tonne ($256/tonne) from the previous quarter on tight supply and severely reduced inventories, amid steady demand, sources said on Thursday.

Prices were assessed at €1,280-1,350/tonne FD (free delivered) NWE (northwest Europe).

There were some slight increases and decreases either side of the €200/tonne rise, but these were not seen to be representative of the wider market.

Buyers said there was little negotiation on the level of price rise, as producers were determined to push contract prices up in a bid to recoup margins and return the industry to a "healthy, sustainable" level.

"Unfortunately, the price development is still not sufficient to find the melamine supply side stable and the suppliers satisfied," one producer said.

Producers’ margins have been squeezed since the second quarter of 2011, on firm raw material costs and weakening demand in a poor macroeconomic climate. A lack of imports, production disruptions and a need to improve market conditions has resulted in price hikes of €180-250/tonne being passed in fourth-quarter contracts.

“Availability is at its lowest since September 2010,” a seller said earlier this week.

Demand is steady and comparable with levels seen at the same time last year, but consumption levels are about 20-30% lower than they were in 2010.

Between the first quarter of 2011 and the same period this year, melamine contract prices fell by €650/tonne as demand softened because of poor macroeconomic conditions.

Demand from the construction sector has been particularly slow. This has resulted in reduced sales for the wood-based panel industry and for glue producers alike, with a few businesses going bankrupt and some plants closing.

Prices picked up in the second quarter of 2012 and have increased by €300/tonne on the low end since the first quarter’s settlement of €980-1,090/tonne FD NWE.

The European melamine market is expected to remain flat in 2013. Sources indicate, however, that if the economy picks up the melamine market would recover quickly.

The melamine spot range is now €1,200-1,350/tonne FD NWE, compared with €930-960/tonne FD NWE seen at the time of the contract settlements in the third quarter.

Melamine is used in the production of moulding powder to make dinnerware, coatings in cars, fan coils and appliances. Other uses include adhesive resins – which are used in the making of wood panels for the construction of kitchens, bathrooms, furniture and flooring.

($1 = €0.78)

By: Helena Strathearn
+44 208 652 3214

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