Monthly Plunge Exceeds 20%! Melamine Prices Break Through 7,500 Yuan, When Will the Market Hit Bottom?

April 27 news

I. Market Review

This week, melamine experienced an extreme market trend of "sharp decline followed by sideways movement." The benchmark price fell from 8,050 CNY per ton at the beginning of the week to 7,025 CNY per ton by the end of the week, with a cumulative decline of 12.73% for the entire week. This nearly erased half of the gains from the previous increase and became the week with the most severe price decrease since the start of this upward trend in China.

II. SpotTong Analysis System: A Comprehensive Interpretation of This Week’s Trend Signals

1. Mean Difference Indicator:

Trend Signal: The 10-day moving average continues to fall below the 20-day moving average, with the difference between the averages turning from positive to negative and expanding negatively within the week. This fully aligns with the technical rule of a downward crossover, indicating a strong certainty of a downtrend or adjustment starting this week.

Change in Momentum: At the beginning of the week, the 10-day moving average declined rapidly, and the negative deviation between the price and the moving average widened quickly, signaling “accelerated downward movement.” However, over the weekend, the price traded sideways at 7,025 CNY/ton, and the distance between the price and the moving average stopped widening, indicating that the downward momentum has begun to weaken marginally and is entering the early stage of “negative divergence narrowing,” meaning the decline is starting to slow down.

2. Price Position Indicator:

After the weekly price fell below 8,000 CNY/ton, all the 10-day, 20-day, and 30-day cycle positions entered a low level, triggering multiple warnings of "10-day oversold, 20-day oversold, and 30-day oversold," indicating that the short-term price has significantly deviated from the short-term moving average, and the technical oversold signal is very clear. From the perspective of the year, the price of 7,025 CNY/ton is still in the middle range of the year, with a space of 1,650 CNY/ton from the annual low of 5,375 CNY/ton. However, after the short-term oversold, the momentum for further significant decline is clearly insufficient.

III. Core Drivers of the Decline

1. During the earlier phase when prices surged on both the supply and demand sides, the market was overly optimistic about peak-season demand for downstream boards and coatings. However, this week, terminal demand has shown no signs of improvement; downstream companies have merely maintained rigid demand-based procurement, and their willingness to take on high-priced goods has completely collapsed. Meanwhile, plants that had previously halted production for maintenance are now resuming operations in a concentrated manner, causing market supply to rebound rapidly. As a result, the supply-demand contradiction has shifted from a tight balance to a looser situation, and prices have lost their support for further increases.

2. The nearly 10% single-day plunge at the beginning of the week shattered market bullish expectations, and pessimistic sentiment spread rapidly. Some traders, in order to hedge against risks, opted to clear their inventories at low prices, further intensifying downward pressure on the market.

4. Trend Forecast

Combining this week's technical signals and market fundamentals, the forecast for next week's trend is as follows:

Short Term (1-2 Weeks): As the price differential remains in a “negative widening” phase, the downward momentum driven by inertia persists. Market sentiment is heavily pessimistic, and downstream buyers are mostly adopting a wait-and-see attitude. Prices are expected to fluctuate repeatedly around the 7,450 CNY/ton mark. If support proves weak, there remains a risk of further declines toward the round psychological level of 7,000 yuan.

Mid-term (1 month): Pay attention to when the 10-day moving average flattens out. Only when prices stop falling and stabilize, and the difference between moving averages shifts from “widening negative” to “narrowing negative,” will it signal a slowdown in the downward trend and the market’s bottoming out.

Operation Recommendations

The market is currently in an unclear bottoming range, with high risks. It is recommended that downstream enterprises maintain rigid demand procurement and should not stockpile large amounts of inventory; upstream production enterprises need to be cautious of the risk of inventory buildup and flexibly adjust their shipping strategies.