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EU Melamine Production: Restrictive Measures on Imports from China Fail to Alleviate the Downturn
By: Marketing research firm IndexBox
In 2016, the anti-dumping tariffs (€415/tonne)
According to IndexBox estimates, EU melamine consumption fell by 2.4% from 2010-2015 - from 293,000 to 286,000 tonnes. A year following the introduction of the tariff, China's share in the structure of consumption deteriorated sharply - from 5% in 2010 to 2% in 2011 (Figure 1). By 2015, however, it had regained its previous level of 5% (13.7 thousand tonnes out of 286 thousand tonnes).
From 2010-2011, EU melamine imports increased twofold - from 50,000 to 104,000 tonnes (Fig.2). Despite a shortlived tumble in 2012 (-16% to 87,000 tonnes), imports remained at this level, indicating that the market had attained a new balance.
Immediately after the tariff was introduced, China's share in melamine imports to the EU plummeted from 27% (2010) to 5% (2011). By 2015, however, it had recovered slightly, reaching 13% (13.7 thousand tonnes out of 104,000 tonnes).
Reduced melamine imports from China were not replaced by their EU-manufactured counterparts. From 2010-2015, EU melamine output contracted by 10.3% - from 311,000 to 279,000 tonnes; the share of domestic supply in consumption tumbled from 83% to 64% over the same period. In contrast, the share of imports from Russia in terms of the melamine imports structure posted a significant increase - from under 1% in 2010, to 14% in 2015.
Despite the EU-imposed restrictions, China has managed to increase melamine exports overseas: from 2010-2015, exports surged by a sesquialteral amount - from 135,000 to 211,000 tonnes. China achieved this figure by adapting its export destinations. In 2015, the share of exports to the Netherlands, Belgium and Italy accounted for less than 1% of Chinese exports; in 2010, it was a little over 4%. From 2010-2015, China aggressively stepped up its melamine exports to Turkey (at an average annual rate of 20.1%), Thailand (15.8%) and South Korea (14%). In 2015, Malaysia assumed the largest share in terms of Chinese exports (13%), followed by South Korea (12%), Thailand (11%) and Turkey (11%).
EU melamine manufacturers are concerned that the EU market will once again be flooded by cheap imports from China, once the tariff term ceases to be effective. In 2016, therefore, the European Commission started to consider its possible extension.
Irrespective of the European Commission's decision, IndexBox analysts forecast that EU melamine production is set to shrink further in the medium term; the unrelenting decline in consumption will essentially be the main impetus for the downturn in production. The prosperity of the EU melamine manufacturers will only improve in the event of a rise in prices, which is sometimes accompanied by a decline in production: in 2013, for example, melamine prices increased a sesquialteral amount against the 2012 figure, amidst a 10% contraction in output (Fig.5). However, EU manufacturers will find it difficult to even count on a rise in prices, should the tariff on Chinese melamine imports be diminished.
Source and figures: http://www.indexbox.co.uk/
Market report: http://www.indexbox.co.uk/