OUTLOOK '13: Melamine price trend unclear on uncertain markets

02 January 2013 02:07  [Source: ICIS news]

By Samuel Wong

SINGAPORE (ICIS)--The price trends for melamine in the year 2013 remains unclear because of contrasting views on demand amid an uncertain global economic outlook, market sources said.

Increased competition from China has resulted in melamine prices being suppressed in 2012, and this will likely be the case into the new year, market sources said. 

Several end-users are testing the feasibility of using cheaper priced Chinese melamine and are not interested in purchasing non-Chinese origin parcels, they added.

“In the Malaysian markets, about 80-90% (end-users) are using China-origin melamine and are getting more receptive to such material,” a northeast Asia-based seller said.

“The competition will continue if the Chinese sellers remain selling at lower prices,” he added.

Meanwhile, there are certainly markets where end-users require non-Chinese melamine, according to another northeast Asia-based producer.

“There are still end-users out there that are only able to use non-Chinese melamine, especially in the melamine paper sector,” a southeast Asia-based end-user said.

However, such end-users are now researching on the feasibility of blending non-Chinese and Chinese-origin melamine to achieve the specifications they require, according to several market players.

“The quality of Chinese melamine is constantly improving, and this will just add to more competition to the rest of the melamine makers,” an adhesives maker said.

Meanwhile, several industry players were in agreement that prices and demand for melamine are likely to improve in 2013, as levels in the year 2012 were too low.

“Demand for melamine in 2012 was too low, even close to abnormal levels,” a northeast Asia-based seller said.

However, the pace of growth is left unclear, depending on the recovery of the global economy.

“Whether the economy will improve is unknown. Despite efforts to solve the Greece debt crisis and Obama’s move to stimulate recovery in the US (economy), there is still no clear direction,” an end-user said.

Demand is likely to remain weak into the first quarter and might even last till the second quarter, a trader said. 

However, most buyers have kept inventories of melamine low towards the end of 2012, so buying interest might increase in the next quarter because of re-stocking, he added

“The pace of growth is still unknown, and this really depends on the recovery on the macroeconomic scale,” he said.

Meanwhile, a southeast Asia-based buyer also expects demand to strengthen from February-March on re-stocking activity.

Market players said they expect the revival of the melamine markets to depend on the recovery of the global economy next year and the pricing mechanism of China-origin cargoes.

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.

Going forward, the Chinese melamine price trend will remain an important indicator in the Asian market, industry sources added.

($1 = €0.76)

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

By: Samuel Wong

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