Weak Supply and Demand Weigh Down Melamine Market Sentiment

September 16, News

This week, the melamine market in China is indeed in a depressed state, with an overall pattern of weak supply and demand, putting downward pressure on prices. As of September 16, the benchmark price for melamine was 5,650.00 CNY/ton, a decrease of 0.22% from the beginning of the month (5,662.50 CNY/ton).

From a regional market perspective, the ex-factory prices in East China are around 5130-5350 CNY/ton, and it is clearly stated that "some negotiation is possible," indicating there is room for discounts on actual transactions; in Southwest China (Chongqing Jianfeng), the price is 5450 CNY/ton; while in North China, the price is around 5125 CNY/ton.

The price of the upstream raw material urea is also declining. As of September 16, the benchmark price of urea is 1,665.00 CNY/ton, a decrease of 2.77% compared to the beginning of this month (1,712.50 CNY/ton). This has weakened the cost support for melamine.

Supply side:

The capacity utilization rate fluctuated at a high level: Although the industry's capacity utilization rate on September 4 dropped by 3.6 percentage points from the previous period (58.98%) to 55.38%, it still remained relatively high overall. Moreover, both the capacity utilization rate and weekly production are expected to see slight increases again this week (week of September 15).

Corporate inventories are under pressure: Due to a combination of high operating rates and weak demand, some companies are facing growing inventory buildup challenges.

Demand side:

The persistent weakness in downstream demand is the primary reason for the market downturn:

Purchase willingness is weak: Downstream companies primarily rely on demand-driven procurement, resulting in few new orders and a "generally subdued buying atmosphere." Moreover, as prices continue to decline, this has further dampened downstream buyers' enthusiasm to make purchases.

The end-use industries are sluggish: Key consumer sectors for melamine—such as engineered wood panels, coatings, and molding plastics—are closely tied to the real estate market. With the real estate sector continuing to struggle, demand in these end-use industries has remained tepid, directly reducing the need for melamine. For instance, from January to July this year, nationwide production of decorative surface boards for engineered wood panels dropped by 7.64% year-on-year.

Market Outlook

In the short term, bearish factors are expected to continue dominating the melamine market, likely keeping prices on a relatively weak trajectory. If demand doesn’t show significant improvement, companies may still be forced to lower prices amid ongoing sales pressures. At the heart of the market lies an imbalance between high supply levels and sluggish downstream demand. It will be crucial to monitor whether downstream industries resume operations more robustly after the autumn season, as this could potentially spark a recovery in demand.

In summary, the current melamine market in China is mainly characterized by: declining prices, significant supply pressure, persistently weak demand, and difficulty for enterprises to make profits. In the short term, it is unlikely that the market will see a significant improvement, and a stabilization or rebound in prices may require a more substantial reduction in supply or a substantive improvement in downstream demand.