The melamine industry should be inline
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Since the start of this year, the price of melamine, the primary raw material for its production, has remained high, significantly increasing manufacturing costs. At the same time, the domestic melamine market is facing severe over-supply, and the influence of global market fluctuations on the local industry is growing. Industry experts, speaking at the recently concluded Second China Melamine and Downstream Industrial Development Promotion Summit, emphasized that the domestic melamine sector must focus on boosting both domestic sales and exports, while enhancing collaboration among companies to find new growth opportunities.
Recently, the pressure on production costs has continued to rise. In 2008, urea—the main raw material—remained expensive, and even after the government imposed price caps, ex-factory prices stayed above 1,900 yuan per ton. This led to an approximate 300-yuan-per-ton increase in melamine production costs compared to the previous year. On the energy front, major power companies in China have requested the State Council to adjust electricity tariffs linked to coal prices. If approved, the tariff could rise by more than 0.15 yuan per kWh. Additionally, with rising inflation and the implementation of the new labor law, companies are now required to pay various types of insurance and increase labor costs by over 20% compared to previous levels. Meanwhile, the country’s tightening monetary policy is also adding financial strain on new melamine projects.
Min Haibo, deputy general manager of Sichuan Meiqing Cyanamide Co., Ltd., pointed out that the first half of the year is traditionally a peak season for urea, but it is a low season for melamine. Manufacturers must accept this reality and not expect urea prices to drop quickly. He argued that regardless of whether they produce their own raw materials or not, melamine plants will struggle to remain profitable if urea is priced at market rates.
From a supply and demand perspective, the imbalance between production and consumption is expected to worsen. In 2008, several new facilities were set to come online, including a 30,000-ton/year plant from Ukraine’s Petrochemical, a joint venture between Fengxi and DSM, another 30,000-ton facility from Gimhae, and a 15,000-ton unit from Deqilong. Junhua Group’s 60,000-ton plant is also expected to be completed by year-end. Many manufacturers are planning expansions, bringing total capacity to 220,000 tons annually, with an additional 400,000 tons under development.
Multinational corporations are also making strategic moves. Companies like DSM are entering into joint ventures or expanding sales networks in China, the Middle East, and the Black Sea region. For instance, DSM and Fengxi Fertilizer recently announced a joint venture. These developments are likely to further expand domestic production capacity. However, domestic demand growth is slowing due to government policies aimed at controlling housing prices, which are limiting the growth of the decorative materials sector. While domestic demand is expected to grow slightly this year, overall demand will still increase.
Industry experts believe that the Chinese melamine market is highly uncertain this year. Despite increased domestic production, supply remains unpredictable, and oversupply is inevitable. Market volatility is expected to rise due to shifting demand and seasonal variations. Under these conditions, the industry will become more reliant on international markets, and changes in foreign demand will have a greater impact on the domestic sector.
However, there is positive news: global demand for melamine continues to grow. Rising energy prices have made foreign production too costly, leading some plants to consider shutdowns or reduced output. Major consumer markets in Europe, North America, and Southeast Asia are showing strong demand. This creates a gap in the global supply-demand balance, offering a favorable outlook for Chinese melamine producers. It is expected that international demand will continue to rise before new large-scale installations in China come online.
In response to current market conditions, experts suggest that boosting domestic sales and increasing exports are key strategies for the industry. Strengthening R&D in downstream products and expanding melamine applications is essential. Examples include developing high-performance variants, improving product quality, and exploring new applications such as tableware, electronics, and foam plastics. Experts also emphasize the importance of macro-control, improved industry management, and better planning to enhance the global reputation of Chinese melamine enterprises and strengthen their technological capabilities and competitiveness.