Core Insights - The domestic melamine industry is experiencing a deep adjustment period due to a supply-demand imbalance, with both capacity expansion and weak demand intensifying market competition [1][2]. Supply and Demand Imbalance - The domestic melamine market ended the first half of 2025 on a downward trend, primarily driven by a fundamental imbalance in supply and demand [2]. - As of 2024, domestic melamine production capacity reached 2.31 million tons, expected to increase to 2.6 million tons by the end of 2025, with an additional 940,000 tons of new capacity to be released in the coming years [2]. - Demand remains weak, particularly from the construction sector, which accounts for nearly 60% of melamine consumption. The sales area of new commercial housing in 2024 is projected to decline by 12.9% year-on-year [2]. Profitability Pressure - The supply-demand pressure has directly impacted corporate profitability, with melamine prices in 2025 plummeting by 20% year-on-year [3]. - As of October 16, 2025, the mainstream ex-factory cash reference price for melamine was 5,084 yuan, with profit margins for various production methods shrinking significantly [3]. - The core reasons for narrowing profits include persistent weak demand and limited support from raw material prices, with urea prices also declining [3]. Export Challenges - In the first eight months of the year, China's melamine export volume reached 427,300 tons, a year-on-year increase of 6.2%. However, the average export price fell by $166.3, indicating that increased export volume did not translate into higher profits [4]. Industry Structural Adjustments - The industry is witnessing three major trends: increased enterprise concentration, regional concentration, and a shift towards green and high-end transformation [5]. - The market share of the top five melamine companies (CR5) rose from 38% in 2020 to 52% in 2025, reflecting a 14 percentage point increase over five years [5]. - By the end of 2025, five regions (Xinjiang, Shandong, Sichuan, Henan, and Shanxi) will account for 77.5% of the total melamine production capacity in China [5]. Green and High-End Transformation - Stricter environmental regulations and upgraded downstream demand are driving the need for green and high-end transformation in the industry [5][6]. - The implementation of the national standard GB 18580-2025 will compel manufacturers to use low-formaldehyde additives, indirectly boosting the demand for environmentally friendly melamine [6]. - Long-term success in the melamine industry will depend on optimizing capacity, upgrading technology, and expanding demand [6].

Core Viewpoint - The melamine industry is facing severe internal competition and price declines, necessitating strict capacity control and rational production adjustments to avoid blind investments and low-level repetitive construction [2][3]. Industry Overview - The market size of the melamine industry has not changed significantly this year, but prices continue to decline, following last year's trend. The competition in the market has intensified, leading to operational difficulties for some companies due to cost inversions [2]. - The average annual growth rate of melamine production capacity has exceeded 5% in recent years. By 2024, domestic melamine capacity is projected to reach 2.31 million tons, with a production of 1.642 million tons, marking a 9.8% increase from 2023, and an operating rate of 71% [2]. - In the first eight months of 2025, domestic capacity reached 2.42 million tons, with a production of 1.118 million tons, reflecting a year-on-year growth of 3.8%, while the operating rate decreased to 69%. By the end of 2025, total industry capacity is expected to reach 2.6 million tons, with an additional 940,000 tons of new capacity coming online in the following years [2]. Demand and Pricing Challenges - The domestic demand for melamine has been pressured by a sluggish real estate market, leading to both demand and price declines. Key downstream application industries, such as board manufacturing, are experiencing weak demand, further exacerbated by traditional off-peak seasons [2]. - The average price of melamine from January to August this year was 5,239 yuan per ton, a decrease of 1,340 yuan compared to 2024, representing a 20% year-on-year decline [2]. Export Challenges - In 2024, China's melamine export volume is expected to grow by 21.3% compared to the previous year, but the growth rate significantly narrowed in the first eight months of 2025, with a noticeable drop in export prices. Additionally, the European Union has imposed anti-dumping duties on several Chinese companies, complicating export efforts [3]. Operational Disparities - There is a clear operational divide among companies based on raw material sources. Northern coal-based melamine producers are faring better due to lower coal prices, while southern gas-based producers are facing high gas prices that push production costs close to breakeven, with some companies even incurring losses [3]. Strategic Recommendations - The industry should focus on strict capacity control and rational production adjustments to prevent blind investments and low-level repetitive construction. There is a need for self-discipline in operations and enhanced communication among companies [3]. - The industry should leverage the "Belt and Road" initiative to explore international markets and strengthen technological innovation to improve competitiveness through equipment upgrades and energy-saving research [3]. - Emphasis should be placed on extending the industrial chain, prioritizing the development of downstream products, particularly low formaldehyde release resins and flame-retardant materials, to promote upgrades towards high-end new materials [3].