South Korean Melamine Market Faces Downturn Amid Reduced Demand

Busan (South Korea): Throughout February 2024, the South Korean Melamine market witnessed a persistent downturn, mainly due to reduced demand from downstream laminate and other end-use industries. The price of urea, a key feedstock, also experienced a decline due to weak demand from downstream agrochemical enterprises, exacerbated by subdued inventory levels in storage facilities. Additionally, the Lunar New Year holiday in Asia further impacted prices, leading to decreased procurement activity in the market.

Melamine prices in South Korea experienced a significant downturn throughout February, reflecting a bearish sentiment in the market. This decline was exacerbated by an oversupply situation, with manufacturers grappling with increased inventory levels and subdued buying sentiments. The market faced additional challenges from disruptions in overseas demand, including issues in the Red Sea and staff shortages, further dampening market dynamics. As a result, the overall market sentiment remained bearish, with high supply levels contributing to a notable reduction in Melamine prices.

The price of Melamine also decreased due to low energy prices, especially natural gas, which hit its lowest level in decades in February. Factors such as high gas production, low consumption, and increased reserves led to oversupply in the market, pushing prices down. Additionally, Europe's mild winter contributed to record-high gas stocks, further reducing production costs and adding to the downward pressure on prices. These factors collectively contributed to the decrease in Melamine prices, as energy costs play a significant role in the production process. As of February 2024, the price of Melamine in the Korean market stands at USD 962/MT FOB-Busan, reflecting a decrease of 5.5% from the previous month.

Amidst the bearish market conditions, demand for Melamine remained low, particularly from downstream laminate industries. Despite the decreased price of Melamine, cautious purchasing behaviors persisted, driven by uncertainties surrounding the economic outlook and challenges within the construction sector. With major construction firms such as Samsung C&T and Hyundai E&C adjusting their order targets and focusing on secure public housing projects, the demand for construction-related materials like Melamine has diminished.

The significant drop in new construction orders, totaling 53.6% compared to the same period last year, highlights the severity of the situation. As construction companies grapple with management challenges and court-administered rehabilitation procedures, the repercussions extend beyond employment. Addressing the construction sector's challenges and implementing strategies to prevent further decline are essential for supporting domestic consumption-driven economic recovery. This cautious approach led to reduced trading activity and manufacturing in February, signaling a decline in demand for Melamine. The market sentiment continued to be influenced by these factors, with manufacturers and buyers alike exercising restraint in their procurement activities.