Supply and Demand Game: Flexible Changes in the Melamine Market in China

November 05, News

Overall, the recent Chinese melamine market has continued to operate on a weak note. On November 5th, the benchmark price of melamine was 5387.50 CNY/ton, a decrease of 0.92% compared to the beginning of the month (5437.50 CNY/ton), and it is currently at a low level within the annual price range. Although there are some individual companies making flexible price adjustments, it is difficult to reverse the overall downward trend of the market.

The current market prices have slightly declined compared to the beginning of the month, indicating downward pressure. However, the "flexibility" of the market is also reflected in this. For example, Jiu Yuan Chemical in Xinji, Hebei, increased its quote by 50 CNY/ton to 5,350 CNY/ton on November 5th, but the actual transaction price is still "negotiable." This reflects that producers are attempting to test the market with higher prices, but due to a lack of solid market demand, the final transactions often come with discounts. This phenomenon of "apparent stability with hidden reductions" or "flexible negotiations" is a true reflection of the current market in China.

Supply side:

China's melamine production capacity is already at a high level. Although the industry's operating rate is maintained at around 70%, social inventory remains high, and market supply is sufficient.

Demand Side:

Melamine demand is closely linked to the prosperity of the real estate industry, with over half of its production used for manufacturing boards. The current adjustment in China's real estate market has directly led to a decline in orders for downstream board companies. Purchases of raw material melamine are mainly small, need-based orders, which are insufficient to support a price rebound.

Cost Side:

As a major raw material, the price of urea has also been operating at a low level during the same period. As of November 5th, the benchmark price for urea is 1,585.00 CNY/ton, a decrease of 1.4% compared to the beginning of the month (1,607.50 CNY/ton). This has led to a reduction in the production cost of melamine, losing a key support factor from the cost side, and further intensifying the bearish sentiment in the market.

Overall, with ample supply and weak demand, the melamine market in China is unlikely to improve in the short term. It is expected that the market trend will mainly be "weak consolidation," with the risk of further price declines. Any "flexible changes" in the market will be localized and temporary, unable to form a broad upward trend.