Supply Side Tightens, Melamine Market Stabilizes in China

December 8th, news

Recently, the melamine market in China has shown a "firm" pattern, with the supply side strongly supporting prices, while the demand side limits its upward potential. As of December 8th, the benchmark price for melamine was 5637.50 CNY/ton, an increase of 0.67% from the beginning of the month (5600.00 CNY/ton).

Behind the “steady operation” lies a complex interplay of multiple factors, including supply and demand as well as costs:

Supply Side:

Recent supply has indeed been contracting. With a concentration of plant shutdowns, the overall capacity utilization rate of the industry in China has decreased from 62.20% at the end of November to 60.80%, leading to a reduction in market supply. At the same time, some production enterprises have sufficient pending orders and low inventory levels, giving them the confidence to maintain and push up their quotes.

Demand Side:

Overall performance was lackluster. Downstream industries such as artificial boards, which are mainly influenced by the real estate sector, have not seen a fundamental improvement in demand. As prices rise, downstream resistance to high-priced supplies becomes evident, leading to a decline in new orders for producers. This is the fundamental reason why price increases are unsustainable.

Cost side:

The price of raw urea showed an upward trend in early December. As of December 8, the benchmark price of urea stood at 1,717.50 CNY per ton, representing a 3.62% increase compared to the beginning of the month (1,657.50 CNY per ton). This has provided firm cost support for melamine prices.

Short-Term Market Outlook

Overall, the short-term market trend will depend on the interplay of the following two aspects:

Upward Potential: If urea market conditions continue to improve and companies maintain low inventory levels along with a strong willingness to support prices, there is an expectation that market prices—especially lower-end prices—could continue to rise.

Downward Pressure: Since this price increase is mainly driven by short-term supply-side factors, the demand side has not provided a solid foundation. Once supply recovers or downstream resistance intensifies, the momentum for further price increases will significantly weaken, and the market may enter a stalemate at high levels or even experience a narrow correction.