Europe Q1 melamine contract prices rise 10%

23 January 2013 23:59  [Source: ICIS news]

LONDON (ICIS)--European melamine first-quarter contract prices have risen by €140/tonne ($187/tonne) from the previous quarter as a result of tight supply, low stock levels and a move to restore margins to an acceptable level, sources said on Wednesday.

Prices are at €1,420-1,490/tonne FD (free delivered) NWE (northwest Europe).

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

“We have closed the majority of our contracts for Q1 [the first quarter] at a €135-150/tonne increase versus Q4 2012,” one producer said. “The range applies to the majority of contracts and the majority of the volume we will supply in Q1.”

Regarding the level of the increase, one buyer said: “I think it's too high. This potentially puts the melamine market into a turbulent situation going forward because the new prices open the market to import material. There seems to be more trader activity than there has been in the last two years and this could put downward pressure on second-quarter prices.”

Another buyer said it would be difficult to pass on increases higher than €120/tonne, given poor market conditions. 

However, producers have been keen to restore margins. While prices fell in 2011 as the weakening economy sapped consumer confidence, high raw material costs of natural gas and ammonia squeezed margins.

The European melamine contract range has returned to a level last seen in the second quarter of 2011. Contract prices have been on the rise since April 2012, following the downtrend seen in 2011.

Demand is steady-to-soft compared to fourth-quarter levels and a little lower than it was at the beginning of 2012, some buyers said. First-quarter offtake is seasonally lower. “Our demand is stable to a little bit down,” a buyer said. “It is weaker than we had expected before Christmas. We’ve not had a very exciting start to the year.”

“Generally, sentiment is coming down – buying interest is a little softer than it was,” a trader said.

One producer said: “Demand is alright and as expected. We could do with a bit more but it’s seasonal.”

Stocks are low in Europe, owing to planned and unplanned outages. Production problems at BASF's 65,000 tonne/year melamine plant in Ludwigshafen, Germany, are ongoing. Industry sources said the production problems might continue until the middle of the year, but there was no confirmation from the supplier.

Russian fertilizer producer Eurochem is running its melamine plant in Nevinnomyssk, Russia, at close to 50% capacity, and is selling low volumes in the first quarter.

Netherlands-based OCI Melamine will undergo its turnaround at the end of March. The turnaround is expected to take three weeks, with completion planned in the second quarter. The 150,000 tonne/year melamine producer, based in Geleen, Netherlands, is building up its stock levels and intends to fulfil its contractual requirements.

Austrian-headquartered Borealis will undergo an extended shutdown in the second quarter for the previously-announced revamp of its Linz, Austria, facilities. The dates of the shutdown remain unconfirmed, although there is some expectation it will begin in May or June.

“Q1 is not very strong. There is not much demand,” one trader said. “But now was about the only good chance for producers to stabilise prices at a high level. In the second quarter, I think we will see stable prices.”

Domestic spot prices are at €1,300-1,400/ FD NWE, up by €50-100/tonne since fourth-quarter contracts settled.

There is very little Asian material coming in to Europe, largely because of anti-dumping measures, but material from outside of the EU is notionally valued at $1,400-1,450/tonne CIF (cost, insurance & freight) European Main Port.

The market is expected to remain flat for much of 2013.

Melamine is combined with formaldehyde to produce melamine formaldehyde resin. End-products include counter tops, dry erase boards, fabrics, glues, houseware, guitar saddles, guitar nuts and flame retardants.

($1 = €0.75)

By: Helena Strathearn
+44 208 652 3214

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