Europe melamine demand could improve as flood repairs begin

20 June 2013 16:17  [Source: ICIS news]

LONDON (ICIS)--There is some expectation that buying interest for melamine will increase slightly in the coming months, as homeowners look to repair damage to flooring and kitchen furniture, following flooding in parts of Europe, sources said on Thursday.

The full extent of the flood damage is not yet known, but repair projects are being planned, sources said.

“We're hoping the flooding will create some business,” a consumer said. “There will be some projects in place to repair the damage done by the floods. So it should have some positive effect [on the melamine market].”

A European producer said: “There is hope that demand will increase because of the flooding.”

Melamine is combined with formaldehyde to produce melamine formaldehyde resin. End-products include countertops, dry erase boards, fabrics, glues, housewares and flame retardants.

The producer expects to see better demand in the third quarter compared with the second quarter. It explained that properties affected by the flooding would need to have flooring, kitchen counters and cupboards replaced, and that melamine demand is likely to increase as a result.

The supplier added that in the last couple of weeks it had seen a slight increase in enquiries for additional trucks, over contracted volumes.

“You need the flooring earlier rather than later. In the last two weeks, we’ve seen additional orders above contracted volumes,” the supplier said.

However, the buyer was doubtful that the market would see much of an uptick in melamine consumption in the third quarter, as flooring stocks are plentiful because of ongoing slow demand.

“Whether this will happen in Q3, I doubt,” the buyer said. “There is quite a bit of flooring in stock. The industry pipeline can handle [any potential increase in demand from the flooding].”

The buyer said the demand would have a positive effect on the market, but said any increase would only be slight. “It won’t be enough to change the market. We discussed it as a potential because the market is really slow,” the buyer added. “It could counteract a further decrease [in prices]. Will it outweigh the weaker demand from the holiday season? I doubt it. The third quarter is usually slower.”

It said there could be additional demand in the fourth quarter for melamine into the kitchen furniture industry, but said it remains to be seen.

The producer is targeting a €50/tonne ($67/tonne) price hike in its third-quarter contracts on low inventories, healthy export demand and on expectations of increased buying interest, following the flooding.

There has been no clear indication yet from other producers, but one supplier said it would be doing its best to maintain its current price level.

The majority of the market expects prices to roll over or decrease, with many players simply speculating on the amount they expect prices to fall. Buyers are aiming for decreases of around €30-50/tonne, and higher, on weak demand in a well supplied market, and on expectations of a traditionally slower third quarter than the second.

The market is balanced.

The majority of second-quarter melamine contract prices rolled over  

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($1 = €0.75)

By: Helena Strathearn
+44 208 652 3214

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