Upward pressure on Europe Q2 melamine contract prices on snug supply

06 April 2017 12:08 Source:ICIS News

Dollars and eurosLONDON (ICIS)--Second-quarter contract negotiations in the European melamine market continue, with upward pressure in the market on the back of snug supply, healthy demand and lower imports, sources said on Thursday.

At this stage, the majority of the players are discussing double-digit increases, although rollovers have been targeted by some buyers.

The majority of buyers are discussing increases, with many not seeing stable prices as a possibility.

There have been some early settlements this week, although the majority of contract talks are ongoing and will conclude in the next two weeks.

Supply is at a balanced-to-snug level, although there was sentiment on the sell side this week that the market is tightening. There was talk of a potential production problem in Europe this week. However, there was no official confirmation from the producer at the time of writing.

The snugness in the market derives from lower imports, and two major European producers preparing for maintenance stops.

Volumes from Qatar remain at a lower level, with players seeing very little material in the market. This is said to be having quite an impact on the supply balance, with the Qatari producer previously exporting two-thirds of its overall capacity to Europe.

Qatar Melamine Company confirmed last week that it was now running at full capacity, and it is not clear when there will be an increase in volumes in Europe.

With higher netbacks in Asia, a number of players this week said they expected a reduction in Qatari product to Europe, with an increase in exports to Asia instead.

Japanese product also remains at a very low level, after volumes increasing in Europe last year, particularly in areas like Spain.

This is linked to the tightening in supply in China last year that increased domestic demand for Japanese producers.

Supply in Asia is still on the tighter side. However, the number of requests to European producers from Asian buyers has cooled off this week.

Demand remains healthy, and is expected to pick up further as the second quarter continues. This is traditional for the period, with the second quarter the highest demand quarter of the year.

First-quarter demand was higher than expected for some, with overall levels either in line or above forecast.

The solid levels of demand can be seen across Europe, with positive sentiments in terms of macroeconomics by many market participants.

First-quarter contract prices settled at €1,410-1,490/tonne FD (free delivered) NWE (northwest Europe), an increase of €50-70/tonne from the fourth quarter.

Focus article by Katherine Sale

By Katherine Sale