SINGAPORE--Chinese melamine makers have a competitive edge over foreign rivals amid rising urea prices but buyers were torn between lower cost and quality products, industry sources said on Wednesday.
A two-tier pricing market currently exists, with Chinese produce cheaper than melamine made by its foreign counterparts, who are being hit by high urea export taxes, they said.
The two-tier pricing could continue due to tightening supply and a perception that Chinese produce were inferior in quality, putting larger producers like Dutch chemicals giant DSM at a price differentiation advantage.
According to global chemical market intelligence service ICIS pricing, average third quarter CFR (cost and freight) prices stood at $1,855/tonne and $1,900/tonne for northeast and southeast Asia respectively.
However, FOB (free on board) China lingered at $1,800/tonne levels, below international producers.
Rising urea prices from China has been squeezing margins for melamine producers and had resulted in closures of six plants since 2004, DSM said in its latest industry update.
There is a urea imbalance in the market now. China s domestic players have a price edge over other producers, a source from a major melamine producer explained.
SABIC, Samsung, other Taiwan and Korean producers left the market. Perhaps we may see other international [producers] exiting, the producer added.
A Malaysian buyer explained that there was a lot of incentive for Chinese producers to sell in international markets due to their ability to offer cheaper melamine.
Still others would choose to stick with the likes of DSM due to consistency of product quality, industry sources said.
A two-tier pricing market currently exists, with Chinese produce cheaper than melamine made by its foreign counterparts, who are being hit by high urea export taxes, they said.
The two-tier pricing could continue due to tightening supply and a perception that Chinese produce were inferior in quality, putting larger producers like Dutch chemicals giant DSM at a price differentiation advantage.
According to global chemical market intelligence service ICIS pricing, average third quarter CFR (cost and freight) prices stood at $1,855/tonne and $1,900/tonne for northeast and southeast Asia respectively.
However, FOB (free on board) China lingered at $1,800/tonne levels, below international producers.
Rising urea prices from China has been squeezing margins for melamine producers and had resulted in closures of six plants since 2004, DSM said in its latest industry update.
There is a urea imbalance in the market now. China s domestic players have a price edge over other producers, a source from a major melamine producer explained.
SABIC, Samsung, other Taiwan and Korean producers left the market. Perhaps we may see other international [producers] exiting, the producer added.
A Malaysian buyer explained that there was a lot of incentive for Chinese producers to sell in international markets due to their ability to offer cheaper melamine.
Still others would choose to stick with the likes of DSM due to consistency of product quality, industry sources said.
