Supply and Demand Weakness, Flexible Fluctuations in the Melamine Market

October 11, News

Market Price:

The current performance of the melamine market can be summarized as "flexible fluctuations under weak consolidation." As of October 10, the benchmark price of melamine is 5562.50 CNY/ton, which is a 0.22% increase compared to the beginning of the month (5550.00 CNY/ton), and this price is at a relatively low level within the year and in recent years. However, the actual transaction price range in the market is extremely wide, with low-end negotiation prices potentially dropping to 5050 CNY/ton.

This reflects a situation where "artificially inflated" pricing coexists with the reality of "under-the-table discounts." High-end quotes largely signal the willingness of leading manufacturers to maintain prices, while lower-tier transactions reveal weak underlying demand and strong bargaining power at the downstream end.

The short-term flexible increase is mainly driven not by strong demand, but by the active contraction of the supply side and the marginal support of the cost line. When some companies reduce their load due to losses, leading to a temporary tightening of local supply, prices show a tentative increase. However, this kind of increase is unstable; once the price rises to a certain level, it will face pressure from hedging positions and traders eager to sell, leading to a lack of upward momentum.

Supply Side:

The supply side is currently the most important stabilizer in the market, but it is also filled with helplessness. The industry's operating rate of 50%-55% is far below the healthy level. This is not a choice made by the companies, but rather the result of both "passive shutdowns" and "active price protection." Some high-cost, old facilities, due to the continuous "price-cost" inversion (theoretical loss of 100-200 CNY per ton), have been unable to maintain production and have been forced to exit. On the other hand, some leading enterprises consciously reduce their load and schedule concentrated maintenance to adjust the market supply, attempting to reverse the supply-demand pattern, which is a strategic "production reduction for price protection."

The greatest pressure on the supply side comes from the high factory inventory. Inventory days generally range from 15 to 20, far exceeding the safety line, which is like a heavy burden on the production enterprises, making their cash flow tight and testing their confidence in maintaining prices. At the same time, the main raw material, urea, continues to decline due to its own supply and demand imbalance, causing melamine to lose a key cost support, and the profit margin of production enterprises is continuously squeezed to the edge of profitability.

Demand Side:

The demand side is currently the weakest link in the market, with its weakness being structural and comprehensive. The largest downstream of melamine—paneling and coatings industry—is highly tied to the prosperity of the real estate and construction sector. Currently, the real estate industry in China is still in a deep adjustment phase, with new starts and construction areas continuously declining, directly leading to a contraction in the total rigid demand for melamine. Downstream factories themselves have insufficient orders, with a significant year-on-year decrease in their operating rates, and thus have an extremely low willingness to purchase raw materials.

Downstream customers have generally adopted a "low inventory" operating strategy, being bearish or cautious about the future market. Their purchasing behavior is entirely a rigid model of "buy as you use," with small single purchase volumes and extreme sensitivity to prices. This makes it difficult for the market demand to form an effective and sustained driving force.

International market demand is also sluggish, and the competition from low-cost products from regions such as the Middle East has intensified, leading to a significant decline in total exports this year. This has forced some of the production originally intended for export to be sold domestically, further exacerbating the supply pressure in the Chinese market and creating a vicious cycle of internal competition.

Looking ahead, the melamine market in China will be in a continuous tug-of-war between "weak reality" and "strong expectations".

In the short term (within the next month), it is expected that the market will continue to follow a "bottom oscillation" pattern. The price level will struggle to rise effectively and is more likely to fluctuate widely within the current low range. The upward space will be firmly blocked by high inventory and weak demand; the downward space will be supported by companies' losses and willingness to cut production. Any price rebound will be brief and unsustainable.

In summary, the melamine market in China after October 2025 is currently in a difficult bottoming phase. Market participants should abandon the illusion of a one-sided significant price increase and instead adapt to finding opportunities amidst fluctuations. In terms of operations, buyers should maintain a strategy of low inventory and small batch purchases; sellers, on the other hand, should focus on reducing inventory and ensuring cash flow as their core tasks. Closely monitoring changes in inventory, costs, and macro policies will be key to grasping the next phase of market trends.