Since the Spring Festival, the domestic MELAMINE market has developed first and then suppressed. The supply is loose and the demand is sluggish, but the cost support still exists, which makes the melamine market play a game of multiple factors and the price may hover around the cost line.
With the end of the Spring Festival holiday, due to the good expectation of the market and the fact that many manufacturers have pending orders to execute, the quotations of melamine enterprises returned after the holiday have been raised, and the mainstream ex-factory price rose to 7800-8200 yuan/ton in early February.
However, due to the resumption of production in the downstream after the Lantern Festival, and due to insufficient orders or inventory of finished products, the start of downstream factories is relatively slow, the demand recovery is less than expected, and the shipment is not smooth. In addition, during the holiday period, many manufacturers have different levels of inventory backlog, the willingness to reduce inventory increases, and the transaction price tends to loosen. By the middle of February, the market continued to be in a downward trend. As of February 17, the factory price was mostly concentrated at 7400-7600 yuan/ton, Compared with the beginning of February, the decrease reached 6.25%.
However, as the price of raw material urea continues to remain high, the cost side provides strong support and also underpins the price reduction of melamine. Since the beginning of this year, the domestic urea market as a whole has shown a slow downward trend. In the absence of a significant improvement in the demand side of melamine, the decline in urea has led to a downward shift in the production cost line, which has a certain negative impact on the melamine industry, and has also become one of the factors for the price decline after the Lantern Festival. In recent days, urea has rebounded slightly, which has also boosted the mentality of melamine industry, and the decline has gradually slowed down. As of February 17, the average market price of urea in China was 2676 yuan/ton. According to the theoretical value, the production cost of melamine was around 8028 yuan/ton, and the cost could still provide some support.
In addition, from the perspective of supply, the starting load rate of domestic melamine enterprises has been in the process of gradual increase since the beginning of the year. In the early stage, due to the high price of raw material urea and the low price of melamine, the profit space of enterprises has been seriously compressed, affecting the enthusiasm of production, so some units have chosen to stop production or overhaul. In addition, it coincides with the Spring Festival holiday, and some units remain in the state of shutdown until after the holiday. Therefore, the operating load rate of enterprises fluctuated between 40% and 50% in January.
However, since February, with the recovery of some equipment that has been shut down, the operating load rate has gradually increased to 60%. As of February 17, the average operating load rate of enterprises was about 64%, up 18 percentage points from the lowest operating load rate in the year. With the gradual increase of construction, the output also increased. In addition, there are many different levels of inventory in the upstream, middle and downstream of the early stage that have not been digested. The overall supply pattern of melamine is in a relatively loose state.
In the later stage, in terms of raw materials, the urea market is still expected to be bearish in the future, but due to the industrial and agricultural demand, even if the urea market stops rising and falling again in the later stage, the decline may still be limited. However, if there is a downward trend in urea, it will still have a negative impact on the melamine market and aggravate the wait-and-see sentiment in the industry.
In terms of supply, as some of the units that will be shut down will resume in the later stage, the enterprise's starting load rate may fluctuate in a narrow range above 60% in the future, and the daily output will fluctuate slightly, but there is still some social inventory in the market, so the overall supply of goods is relatively abundant.
In terms of demand, the consumer market will be in a state of gradual recovery in the later stage, and the starting load of downstream factories will continue to increase. However, the follow-up of terminal demand orders is limited, so the improvement rate may still be relatively slow. In addition, compared with the same period in previous years, the export sector may also shrink, the demand release is limited, and the attitude of overseas downstream customers is also relatively cautious, which to some extent has weakened the pulling effect on the domestic market.
In general, the demand support is limited and the supply pattern is loose. Zhuochuang Information believes that the domestic melamine price may continue to hover around the cost line in the later period, and the mainstream ex-factory price may be adjusted in a narrow range around 7500-7600 yuan/ton in a short time.
