The Game Between Costs and Demand: Melamine Remains Stable

February 11th, News

This week, the melamine market in China indeed showed a pattern of "stability with a slight upward trend." As of February 11, the benchmark price of melamine was 5737.50 CNY/ton, an increase of 1.10% from the beginning of the month (5675.00 CNY/ton).

I. Market Dynamics

The recent market "stability" mainly stems from the balance of three factors: costs, supply, and demand.

1. Cost Side: The price of raw material urea rose somewhat in January, providing rigid cost support for melamine and limiting the room for price declines.

2. Supply side: Although the units that were under maintenance have gradually resumed production and the industry's operating rate has improved, there is not yet a significant oversupply pressure. The market supply and demand are in a state of weak balance.

3. Demand Side: The resumption of work in downstream industries such as boards and coatings has been relatively slow, with most adopting a strategy of purchasing on demand, and there has not been a significant pre-holiday stockpiling trend. At the same time, the export market has been stable but has not provided an unexpectedly strong boost.

II. Short-Term Market Outlook

Overall, during the period before the Spring Festival, the melamine market in China is expected to continue its range-bound fluctuation. The solid cost bottom line and the strong desire of manufacturers to stabilize prices determine that prices are unlikely to fall significantly in the short term. Weak domestic demand and the lack of a strong boost from exports also limit the potential for substantial price increases.

The next direction of the market will mainly depend on the intensity of restocking after the resumption of work by downstream sectors in China and whether export orders can significantly improve.