How Geopolitical Conflicts in the Middle East Ignite the Melamine Market with a Monthly Price Increase of Nearly 27% in China!

March 24th, News

According to monitoring data, in March 2026, the market price of melamine (premium grade, industrial grade, purity 99.8%) in the East China region soared from 5,970 CNY/ton at the beginning of the month to 7,575 CNY/ton on March 24, with a single-month price increase of 26.88%, setting a new high for the year in China.

Analysis of Market Driving Factors

This round of surge is the result of the resonance between geopolitical shocks and industrial fundamentals, with the former being the dominant force.

Middle East geopolitical risks become the core factor.

The U.S.-Israel-Iran conflict has led to the “functional closure” of the Strait of Hormuz—the “chokepoint” for global energy and fertilizer trade. This strait handles roughly one-third of the world’s seaborne fertilizer trade. The Middle East is not only a major global exporter of liquefied natural gas (LNG) but also a key producer and exporter of nitrogen fertilizers (urea). The conflict has directly resulted in two major consequences:

Supply Chain Disruption: Approximately 35% of global seaborne urea trade is disrupted, with Iran (the world's third-largest urea exporter) virtually halting its exports. This has sparked a global fertilizer supply panic, causing international urea prices to surge by about 30% in a week, reaching a new high since 2022. As of March 24, the benchmark price for urea is 1857.50 CNY/ton, an increase of 1.16% compared to the beginning of the month (1836.25 CNY/ton).

Soaring Costs: Natural gas is the primary raw material for international urea production. The conflict has led to the shutdown of LNG facilities in countries such as Qatar, driving up international natural gas prices and significantly increasing the production costs of overseas urea.

Cost Transmission and Sentiment Fermentation

The sharp fluctuations in the international urea market profoundly impact the Chinese market through two channels: cost transmission and market sentiment.

Cost End: Although urea production in China is mainly coal-based, the sharp increase in the cost of natural gas-based urea internationally has created a strong comparative effect and expectation of price increases. At the same time, the global energy crisis triggered by conflicts has also pushed up the prices of alternative energy sources such as coal in China, solidifying the cost support for urea and downstream products like melamine.

Export end: The huge price difference between domestic and international markets (the price difference of urea outside China once exceeded 2500 CNY/ton) has fueled speculation about a relaxation of urea export restrictions in China. Although the current policy focuses on ensuring supply and stabilizing prices, the strong expectation of exports has intensified the bullish sentiment in the Chinese urea market, directly affecting its downstream product, melamine.

Downstream demand is experiencing a phased recovery.

After the Spring Festival, the operating rates of downstream industries such as boards and coatings gradually increased, leading to a concentrated release of rigid demand for melamine. With the mentality of "buying on rising prices rather than falling prices," downstream companies actively replenished their inventories, further amplifying the market's purchasing enthusiasm and creating a short-term demand pull.

China's supply side has tightened in a phased manner.

Future Market Outlook

Geopolitical risk premium remains, with strong cost support and a bullish market sentiment, melamine prices are expected to remain high and may even continue to rise. However, one must be cautious of the potential for rapid price increases to suppress downstream demand. The market focus will return to the fundamentals of supply and demand and policy dynamics. If shipping in the Strait of Hormuz resumes and international urea prices retreat, the logic of cost support in China will weaken. During the peak season for spring fertilizer use, the national "ensure supply and stabilize prices" policy will continue to play a significant role. Whether the urea export policy eases will be key to influencing the cost side of melamine.

Conclusion

The surge in the melamine market in March was essentially a cost-driven trend sparked by a geopolitical crisis in the Middle East. The closure of the Strait of Hormuz directly severed the global fertilizer supply chain, leading to a sharp rise in international urea prices, which then impacted the Chinese melamine market through both cost and sentiment channels. Currently, the market has factored in a high risk premium, and participants need to closely monitor the developments in the Middle East, changes in China's urea export policies, and marginal shifts in downstream actual transactions, while being cautious of the price correction risks after the sentiment fades.