Melamine prices in the European market rose in December 2023 as increased demand for furniture over the past few weeks and attacks by Houthi rebels in the Red Sea disrupted key global trade routes. This has had a knock-on effect on economies such as Germany. Although the price of urea has fallen slightly, Germany, as the main furniture exporter to the EU, remains a lucrative market for the furniture industry. The German furniture market favors furniture made from natural materials and innovative design, especially in the kitchen furniture segment, where sales, technology and innovative product design are growing. In the short term, the market is expected to be driven by growing demand for wood laminates, coatings and adhesives from the construction industry.
Melamine use has increased in recent years as the global economy improves and industries such as furniture and automobiles develop. However, melamine consumption declined in 2020 due to the COVID-19 pandemic, which impacted the global economy and industries such as construction and automotive. Melamine consumption recovered in 2021, but experienced some slowdown at the end of 2022 due to the global economic downturn. However, consumption increased slightly in 2023 and is expected to increase slightly in the coming years.
The Red Sea has come under increasing attacks by Houthi rebels in recent weeks, disrupting key global trade routes and damaging economies such as Germany. Melamine is a common chemical that has this effect. Germany is an important exporter of melamine and also relies heavily on imports from countries such as China and Trinidad and Tobago. As Houthi attacks threatened shipping safety in the Red Sea, a major route for imported products, melamine prices soared. Vessels carrying melamine and other cargo faced delays and detours, leading to rising fuel costs and logistical problems for importers, ultimately driving up melamine prices at German ports. Increased security risks in the Red Sea have also led to sharp increases in insurance premiums for shipping companies, increasing the final cost of melamine imports. The continued rise in prices affects consumers in Germany and beyond. The armed attack by the Houthis not only affected the price of melamine, but also led to an increase in shipping costs. Major shipping companies have increased additional fees due to long sailings around Africa, increasing the cost burden for German importers. Rising transportation costs are exacerbating rising melamine prices, exposing the entire supply chain to the risk of rising costs and potential shortages. Germany, which relies heavily on LNG imports for its energy source, is facing challenges as delays in vital supplies through the Red Sea cause LNG prices to soar. High LNG prices further impact melamine production costs. ChemAnalyst expects melamine demand to continue to rise in the coming months, consistent with supply disruptions in the Red Sea and increased demand from downstream industries, particularly the automotive industry.