Short-term Costs and Demand Both Driving Melamine Prices to Stay Stable and Improve

February 26 News

I. Market Overview:

This week, the melamine market in China showed a "stable and improving" trend. As of February 26, the benchmark price rose to 5750.00 CNY/ton, an increase of 1.32% from the beginning of the month, successfully breaking through the 5750 yuan threshold. The spot market also warmed up, reflecting improved regional transactions. This round of price increases was mainly driven by post-holiday restocking demand from downstream buyers, but the underlying market competition remains intense.

II. Cost Side:

The price of raw urea has shifted from weak to strong, significantly boosting cost support for melamine. With the start of spring farming preparations, the implementation of policies aimed at ensuring supply and stabilizing prices, and heightened export expectations, urea prices have clearly risen. As of February 26, the benchmark price reached 1,830.00 CNY per ton, up 2.66% from the beginning of the month. This means that the current rise in melamine prices is now underpinned by both “cost-driven” and “demand-driven” factors—a shift from the previous situation where price increases relied solely on demand. However, urea companies still hold high inventories—at 1.176 million tons—creating ongoing pressure from inventory accumulation that limits the room for further price increases. Therefore, the strength of cost support for melamine still requires close, dynamic monitoring.

III. Supply Side:

The supply side exhibits a dual characteristic of being "orderly in the short term but under pressure in the long term."

Short-term: In early February, the industry capacity utilization rate in China was about 57.95%. Some companies have a tight supply of goods, but there is no significant pressure to accept new orders.

Long-term: The key variable is that Xinjiang Xinji Energy’s 120,000-ton-per-year facility successfully completed its first feed-in on February 12, officially bringing the new capacity onto the market. This will gradually increase market supply and intensify industry competition.

Fundamentals: The long-term overcapacity in the industry in China remains unchanged, and any short-term demand-driven price increases may be suppressed by ample supply capacity.

IV. Demand Side:

Downstream demand is showing a seasonal recovery. After the end of the Spring Festival holiday, sectors such as panel manufacturing have a need to replenish their stocks, providing short-term support to the market. However, the demand is moderate, with downstream buyers mostly purchasing according to their needs, and there has not yet been any large-scale concentrated buying. The export market is also stable. This round of demand is supported by a "short-term window period" rather than a strong trend-based recovery.

5. Outlook for the Future Market

Overall, the current market is experiencing a short-term demand-driven increase. In the context of long-term overcapacity, the upward potential will be constrained. It is expected that the market will maintain a stable but slightly strong fluctuation in the short term. If subsequent demand support weakens and supply increases, the market may face pressure to correct.