North American Melamine Prices Drop Amid Bearish Market Activity

During the early weeks of July, USA's Melamine prices continued to decline in the North American market due to persistently low demand. The trading atmosphere of the domestic Melamine market was sluggish amidst subdued market activity. Procurement activities were cautious, reflecting ongoing challenges in balancing supply and demand dynamics. Seasonal factors such as heavy rains and severe weather, including hurricanes, further reduced construction activities, contributing to the decline in Melamine prices.

On the energy front, natural gas prices, which experienced significant declines in early 2024 due to a mild winter, rebounded by mid-June, with European prices rising 25% by late June. However, the impact of higher natural gas prices on Melamine was offset by low demand and high inventory levels. Supply chain disruptions on major trade routes, ongoing geopolitical tensions, and port congestion hampered exports, further affecting Melamine prices.

Amidst challenging market conditions, manufacturers in the USA grappled with high inventory levels as they struggled to find buyers for Melamine. The slowdown in construction activity exacerbated this issue, leading to excess supply and further dampening demand. The overall inventory remained high, with downstream procurement focused mainly on immediate needs. The trading atmosphere was mild, with new orders purchased as required, while demand from downstream laminate and coating sectors continued to be sluggish.  In North America, feedstock urea prices saw a sharp decline in Q2 2024 compared to Q1 2024, as the international urea market faced severe pressure from depressed fertilizer demand and substantial price pressures across all categories.

Demand from downstream sectors such as plywood, laminate, and furniture remained weak as indicated by fall in global lumber prices, falling below USD 450 per 1,000 board feet at the beginning of July for the first time since June 2020. This decrease followed a mid-March peak amid subdued home-building activity. In May 2024, existing home sales declined by 0.7% from the previous month and fell 19% from a year ago, influenced by high prices and rising mortgage rates that deterred potential buyers. This trend impacted lumber prices and downstream industries, including Melamine. Seasonal factors such as hurricanes further hampered construction activities, while high inventory levels left manufacturers struggling to find buyers. Demand from importing nations also remained low due to economic challenges and a distressed real estate sector. This contributed to a sluggish overall market where downstream procurement was primarily on demand.

As per ChemAnalyst, Melamine prices are expected to continue declining due to reduced procurement in construction activities, which is anticipated due to seasonal factors like hurricanes that have hammered construction activities. High production in the previous month will also exert downward pressure on Melamine prices, making it challenging for the market to recover in the near term.