Europe melamine producers eye €45-100/tonne hikes in Q2 contracts

20 March 2013 16:09  [Source: ICIS news]

LONDON (ICIS)--European melamine producers are aiming for price increases in the second quarter as a result of expected supply constraints, owing to a number of outages, sources said on Wednesday.

Nominations for the second quarter vary. On the lower end, targets range from €45-75/tonne ($58-$96/tonne), and at the upper end sellers are talking about hikes in the region of €65-80/tonne and up to €100/tonne above first-quarter contract prices. Targeted hikes are being driven in large part by planned outages at two major suppliers.

Netherlands-based OCI Melamine will undergo a three-week turnaround at its 150,000 tonne/year melamine plant at the end of March and Austrian-headquartered Borealis will undergo an extended shutdown from the end of May until the middle of July for a revamp of its Linz, Austria, facilities. Borealis has the capacity to produce 50,000 tonnes/year of melamine at Linz.

“Demand is not spectacular, but steady, and we see some reduction in supply due to outages,” a producer said. “I'm confident that we will achieve increases.”

Another producer said: “We want to behave wisely with regards to the supply side and the demand side, and the condition of the industry. [The second quarter] will be balanced with a feeling of tightness arising from breaks in production.”

A third producer said: “We will probably aim for a modest increase because of the supply constraints. The picture is foggy now based on demand not being as good as everyone had thought it would be. The industry would benefit from a period of stability and we have a realistic approach that a hefty rise is no longer required.” The producer added that the market needs mutual profitability.

Demand for melamine in the second quarter is typically healthier than it is in the first quarter. “Going down in price could not be good for producers, and going up could not be good for converters,” one producer added. “It's going to be tighter, demand won't go down.”

Buyers are expected to strongly resist price increases on lacklustre demand and healthy availability. Buying interest has weakened since 2011 amid ongoing concerns surrounding the eurozone debt crisis.

“There is much too much melamine here [in Europe], demand is poor. There is a minimum of 20-25% less demand than there was in an average quarter in 2012,” a buyer said. “If anybody is saying the market is tight, it's really funny. I have too much material on stock. What we see is too much melamine and the market is, at the moment, very long. There is not enough demand from the industry. I think an increase is ridiculous,” the buyer added.

Another buyer said its demand is not increasing and that it is stable on a low level, which it estimated is 25-30% less than it was in 2012. The buyer attributed the dip in consumption to the state of the economy and said the European market is now competitively priced. It said it did not expect to see any supply constraints in the second quarter.

“Demand is not fantastic so it might be difficult to push increases through,” one seller said.

Looking ahead, one trader said the third quarter would be a buyer’s market. “I believe that a very interesting third quarter will be waiting for us. It will be buyer’s market again. Unless some big guys declare unexpected force majeure or shutdowns.”

Negotiations are under way.

($1 = €0.78)

By: Helena Strathearn
+44 208 652 3214

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