Surge by 4,000 CNY/ton! Is the melamine market in China showing signs of peaking?

April 2nd News

I. Overview of Market Trends

This week, the melamine market in China showed characteristics of high prices stabilizing and transactions gradually slowing down. According to the data, on April 2, the benchmark price of melamine reached 9,450.00 CNY/ton, an increase of 0.27% from the beginning of the month, continuing the strong upward trend seen earlier before entering a phase of stabilization. From the price curve, it can be seen that in mid-to-late March, the price of melamine began to rise rapidly. Within just one month, the price increase was significant. Although it remained at a high level at the beginning of April, there were already signs of weakening at the transaction end, with downstream resistance to high-priced supplies gradually becoming evident.

From the perspective of the commodity market analysis system, the current positions for melamine at 10-day, 20-day, and 30-day intervals are all marked as high levels. The moving average system shows a bullish arrangement, clearly indicating a short-term upward trend; however, the characteristic of high-level fluctuations is becoming increasingly prominent. Meanwhile, today’s price has already doubled from this year’s low of 5,375.00 CNY/ton, placing it in a historically high price range. The upward momentum is gradually shifting from a “one-sided rally” to a “high-level tug-of-war.”

II. Slowing Down the Driving Factors

Demand Side:

The current melamine price has exceeded the 9,000 CNY/ton threshold, far surpassing the cost tolerance of downstream industries such as boards and coatings in China. As prices continue to rise, downstream enterprises have significantly slowed their inventory replenishment pace, shifting from the previous "buying on rising prices" to "purchasing as needed in small quantities." The scale of new orders has contracted, and market wait-and-see sentiment has intensified, which is the core reason for the slowdown in transactions this week.

Supply Side:

In the early stage, the operating rate of the melamine industry in China remained low, coupled with factors such as plant maintenance and environmental inspections, leading to a tight supply of goods in the market. Manufacturers were strongly willing to hold back sales to maintain high prices. However, as prices continued to rise, some production enterprises gradually resumed operations, and pending orders were gradually delivered. The circulation of spot goods increased, and the support from the supply side for prices marginally weakened.

Cost side:

Melamine core raw material urea prices, although still high, saw a narrowing of the price increase this week. International LNG price fluctuations have stabilized. The cost transmission chain from "methanol → urea → melamine" still provides support, but it no longer exhibits the strong upward trend seen previously. The cost driver for melamine has shifted from "strong pull" to "weak support."

III. Price Trend Forecast (based on Commodity Market Analysis System)

Based on the current market supply and demand, costs, and transaction conditions, we forecast the future price trend of melamine in three stages:

Short-term (1-2 weeks): High-level fluctuation, with slight increases or stability

In the short term, geopolitical conflicts show no significant signs of easing, and the tight global fertilizer supply situation remains unchanged, with continued support from raw material prices. Meanwhile, manufacturers still have a backlog of unfilled orders, and their willingness to maintain high prices has not completely waned. It is expected that melamine prices will fluctuate at a high level within the range of 9,400 to 9,800 CNY per ton, with the possibility of occasional small-scale upward tests. However, trading volumes are unlikely to increase significantly, and any price hikes will be limited in scope.

Medium-term (within 1 month): The risk of a high-level pullback intensifies, and prices will gradually correct.

If the downstream resistance to high prices continues to escalate, leading to further shrinkage in transactions, and with some companies resuming production to increase supply, the supply-demand contradiction in China will gradually ease. Meanwhile, if geopolitical tensions ease and international urea and LNG prices fall, the cost support logic will weaken. At that time, the price of melamine may see a correction, with an expected decline to the range of 8,500-9,000 CNY/ton, gradually eroding the high premium.

Long-term (1-3 months): Return to fundamentals, trading in a range-bound pattern.

In the long term, the overcapacity of melamine has not fundamentally changed. Demand in China is mainly driven by essential needs, and although exports have increased, they are unlikely to fill the demand gap in China. Costs will return to rational levels, and the market will move away from the influence of geopolitical risk premiums, returning to the fundamentals of supply and demand. It is expected that prices will fluctuate within the range of 7500-8500 CNY/ton, generally showing a trend of "high-level decline and stable operation."

In summary: Key areas of focus include the price trends of urea raw materials, changes in the operating rates of the melamine industry, operating rates and transaction data from the downstream board industry, and developments in the geopolitical situation in the Middle East (which affect global fertilizer supplies). If geopolitical tensions continue to escalate and raw material prices rise again, melamine prices could remain stubbornly high beyond expectations. Conversely, if downstream demand recovers rapidly and transactions pick up, this could slow down the pace of price adjustments. On the other hand, if China’s newly commissioned capacity is released all at once, putting significant pressure on supply surplus, the magnitude of price corrections could exceed expectations.