OUTLOOK ‘19: Europe melamine market poised for uncertainty, increased Chinese competition

Author: Katherine Sale


LONDON (ICIS)--The European melamine market is poised for a year of economic uncertainty and continued increased competition from Chinese producers, as prices hit the top of the cycle in late 2018.

European melamine prices were on an upward trajectory from mid-2014, with strength in the economy and balanced-to-snug supply contributing to firmer fundamentals.

However, improved supply, higher imports, and the general woes over the European economy damped sentiment for fourth-quarter pricing, leading to the first pricing drop in the melamine market for four years.

The global melamine market has been dominated by China in recent years, with environmental inspections in 2016/2017 reducing Chinese production and tightening global supply.

While exports to Europe during that period were limited, linked to ongoing anti-dumping duties, it resulted in an increase in demand for European suppliers, as global buyers looked to alternative sources of supply.

Chinese production levels have increased in 2018, and with European prices continuing to rise, Chinese material became attractive once again, despite the existing anti-dumping duties.

While some European sellers feel Chinese imports have “reached a peak” in 2018,  competition is expected to remain in 2019.


There has also been increased competition from Qatar toward the end of 2018, again highlighting the improved global supply/demand balance, with imports in Europe falling in recent years, leaving less sources of supply for local buyers.

Higher urea prices could provide upward pressure for Chinese producers because feedstock prices are a key factor for the country’s sellers, who lack integrated production facilities.

Export orders are traditionally strong for European sellers in the first-quarter, especially given relationships established in recent years.

However, while overseas demand is expected to start well in January, the European picture is clouded with uncertainty.

“I think people are expecting lower growth because of the uncertainty,” said one European producer.

Melamine demand traditionally increases in line with the economy, with 80% consumed by the construction sector.

“You cannot expect the same level of growth that we have seen in the last few years forever. Growth is still growth, and it still means demand is at a high level,” the seller added.

It has been the high level of regional demand that has contributed to the balanced-to-snug supply in recent years.

Apart from plans for two new small melamine plants in Russia, scheduled to be online 2021 onwards, and a new plant in India coming online in 2019, no other changes to the global make-up are expected.

There are question marks over the sustainability of the levels of Chinese imports in Europe, with any change to environmental policy having the ability to completely shift global melamine dynamics.

With the end-user applications spread expected to remain steady for the foreseeable future, melamine growth will remain reliant on the strength in the economy.

2019 could be a year of turbulence for the European chemical markets, and one of uncertainty for melamine after a golden age of growth.

Focus article by Katherine Sale