Uses

Melamine is mostly used in thermosetting resins for laminates, adhesive resins, coatings and moulding compounds, paper and textile treatments. Moulding compounds are used to make dinnerware, coatings in cars, fan coils and appliances.

Around 75% of consumption is attributed to the wood-based panel industry for the construction of kitchens, bathrooms, furniture and flooring. Melamine can be used in polyurethane foams for furniture and mattresses flame retardant qualities.

Supply/demand

The European melamine market has been well-supplied in recent years, ultimately weighing on prices and compressing seller margins. Melamine demand usually peaks in the second quarter, but this year, consumption was below normal due to the coronavirus pandemic shutdowns. Supply remains long and imports into Europe are less attractive due to the eroded prices seen. Going forward there might be fewer imports as consumers could favour sourcing material locally as prices are competitive with fewer logistical steps involved.

Russia’s Metafrax’s ammonia-urea-melamine (AUM) project in the Perm region is now 70% finished. Due to come fully onstream next year, the AUM project comprises a 300,000 tonne/year ammonia unit, a 570,000 tonne/year urea plant and a 40,000 tonne/year melamine facility. Swiss company Casale is the technology licensor and engineering, procurement and construction management (EPC) contractor. India’s state-owned Gujarat State Fertilizer & Chemical (GSFC) started its Vadodara-based melamine plant in the second quarter 2019. INEOS completed the sale of its Melamines & Paraform business to German phenolic resins producer Prefere Resins in July 2019.

 

Prices

European quarterly prices have been on a downward trajectory since October 2018 due to lengthening supply. European prices were not attractive to exporters as prices dipped below antidumping thresholds, making it less feasible to purchase material from overseas.

Previously, Chinese export material was more attractive despite the antidumping duties in place, adding more length in Europe. After a long period of compressed margins, suppliers in China cut operating rates to deal with the oversupply, leading to supply-driven price increases in August. Asia remains an EU export destination along with South America.

In the second quarter, Chinese material entered Russia at very competitive levels, adding length overseas. Second-quarter contracts were agreed at rollovers and slight decreases in March, as the effects of lockdown really hit during April and May. Double-digit decreases were agreed in the third quarter to reflect the drop in demand during the height of lockdown restrictions in Europe.

Upstream, global urea prices softened in August for the first time since early June, after a run up of 20-30%. Ammonia prices were stable-to-firm east of Suez on reduced export availability from southeast Asia in August 2020.

Technology

Melamine is a base chemical. The low pressure catalytic route occurs in the vapour phase forming isocyanic acid which is converted to cyanamide and then melamine. In the high pressure process, the reaction takes place without a catalyst where urea decomposes into cyanic acid and ammonia in an endothermic reaction. The cyanic acid then polymerises to form cyanuric acid which condenses with ammonia to form melamine.

Outlook

Melamine demand traditionally increases in line with the economy, with 80% consumed by the construction sector. In August 2020, European Commission data showed an 11.7% decline in second-quarter GDP for the EU. The UK, Spain and France were the worst-hit, with GDP declines of 20.4%, 18.5% and 13.8% quarter on quarter in April-June, whereas Germany and the Netherlands saw declines of 10.1% and 8.5%.

With the declines seen in GDP, it is harder to predict demand outlooks based on GDP, given the economic landscape. A sombre outlook is still apparent in cases due to the continued effects from the coronavirus on the global economy.

On a more positive note, demand from the furniture and flooring sectors improved during summer 2020 in cases, as the do-it-yourself (DIY) sector was aided by end-users
focusing on home improvement projects. Automotive sector recovery could take much longer as it was one of the hardest
hit in the industry. Melamine sellers have seen some improved demand in August
with consumers attempting to make up for losses seen in the second quarter and they are hopeful demand will continue to slowly improve. ■