With overcapacity and blocked exports, is the winter of melamine coming?

Poor industry status

Industry insiders said that after the severe winter test in 2019, this year the domestic melamine industry is still facing overcapacity, export decline, product backlog and disorderly market competition, coupled with the continued weakness of foreign markets, the industry's most difficult period has come.

In 2019, although the domestic melamine production capacity growth slowed down and domestic consumption increased, the export volume fell sharply. In addition, the pressure on safety and environmental protection increased, and the production cost increased, which led to some companies inverting costs and prices. The industry operating rate remained relatively low.

According to the statistics of the China Nitrogen Fertilizer Industry Association, as of the end of 2019, the effective domestic melamine production capacity reached 1.945 million tons per year. In addition to the commissioning of the 50,000-ton / year new plant of Kuitunjinjiang, some of the originally planned expansion projects were cancelled due to market conditions , Suspend or delay construction.

In 2019, China's melamine output is about 1.3 million tons, and the operating rate of the plant is about 64%. From the current point of view, the operating rate of the melamine industry is less than 60%, but the downstream demand is weak, the company's shipments are blocked, the inventory is increased, the market supply and demand conflicts are prominent, and the focus of negotiations is loose.

All parties concerned
Cost aspect

In the first half of 2019, the market price of urea continued to be high, but in the second half of the year, prices fell all the way, with a year-on-year decline of more than 13%. The overall performance of the urea market was weak last year, making it difficult to support the cost of melamine.

From this year's perspective, although the price of urea rose during spring cultivation, it was still lower than that of the same period last year, further weakening the cost support of melamine.

Export

According to customs statistics, China's export of melamine in 2019 was only 280,000 tons, a year-on-year decrease of 30%; the average export price was 846 US dollars, a year-on-year decrease of 29%, and there has been a rare drop in volume and price in recent years.

The reason is that on the one hand, due to the adverse impact of the international economic situation, the demand for foreign downstream industries has decreased significantly; on the other hand, due to the commissioning of new foreign equipment and the normal production of some old devices, external demand has decreased significantly.

This year, the Ministry of Finance and the State Administration of Taxation announced on March 17 that the export tax rebate rate for melamine products will be increased from 10% to 13% on March 20, encouraging production enterprises to go abroad.

However, the recent spread of new overseas pneumonia outbreaks has caused concern for China's melamine export market.

Demand side

The main downstream of melamine is the impregnated paper and wood processing industries, and the demand for both accounts for about 60% of the total demand for melamine. In addition, other downstream industries include flame retardant, resin, and paint industries.

China is the world's largest producer of wood-based panels. At present, China's wood-based panel manufacturing industry is dominated by plywood. The domestic plywood industry as a whole is in an overcapacity state, and the oversupply situation is more obvious.

How to break the game?

In 2019, affected by Sino-US trade frictions, China ’s exports of furniture and other products have been blocked, and the consumption of melamine in paints and other products has declined. Domestic melamine demand has not increased much. Under the situation of blocked exports, the contradiction between supply and demand in the entire industry is more prominent, and the market is sluggish. Inevitable.

This year, due to the impact of the domestic epidemic in the early stage, the downstream sheet metal companies have been shut down or have a low load situation. Although the recent start of domestic enterprises has resumed, but the foreign epidemic has begun to spread, and exports have been severely blocked, and the demand for melamine is difficult to boost.

Under the current severe global epidemic situation and the obstruction of export channels, the melamine industry can only embark on the road of healthy development as soon as it strengthens its "inner power" practice, starting from the elimination of backward production capacity, market coordination and stability, standard setting and innovation drive.