US market access restored for melamine producers in Trinidad & Tobago

A favourable court ruling has cleared the way for local petrochemicals firm Methanol Holdings (Trinidad) Limited (MHTL) to resume exports of melamine to the US.

A white, crystalline powder produced from urea, melamine is used in the production of laminates, wood adhesive resins, surface coatings, textile treatments and dinnerware, among others.

Regulatory victory

Trinidad and Tobago was forced to halt sales to the US after the US Department of Commerce (DoC) made a preliminary ruling in April 2015 that MHTL and several Chinese exporters were selling melamine at below fair value.

The investigation was prompted by petitions filed by Cornerstone Chemical, the sole US melamine producer, in late 2014.

In its final determination, handed down in early December, the US International Trade Commission (ITC) ruled that imports from T&T did not cause any material injury to the US producer, media reported.

The commission did, however, uphold its ruling that Chinese producers were selling melamine below fair market value, to the detriment of the US industry. According to the preliminary DoC investigations, Chinese producers were selling melamine at a dumping margin of more than 350%.

The ruling paves the way for MHTL to resume sales to the US in 2016, and for T&T to regain its standing as a significant offshore supplier to the US market.

Prior to the ruling, T&T and China were the two largest melamine exporters to the US, where domestic production capacity stands at around 75,000 tonnes, compared to 37,000 tonnes of imports in 2014, according to data from the ITC.

Shifting supply

When MHTL and its Chinese counterparts were excluded from the US market, melamine importers turned to European producers to bridge the supply deficit.

Manufacturers in the Netherlands and Germany, in particular, were able to take advantage of the absence of product from China and T&T to boost their US market share in 2015. Nonetheless, supply shortfalls saw US melamine imports decline by 38% year-on-year to below 25,000 tones, as per ITC figures.

European supply came under pressure late last year, as the continent’s top-three melamine producers saw output fall due to technical production problems and plant closures, creating a gap in the supply chain.

While these difficulties have reportedly been resolved, media coverage suggests European producers could still be facing an order backlog from late 2015, which could give MHTL further breathing room to reclaim its North American market share.

Demand growth

MHTL’s return to the US market is timely, with prices edging up on strong demand and a notable absence of Chinese production.

Melamine prices are expected to increase by between $0.08 and $0.10 per pound in the first quarter after finishing the year at nearly $0.80 per pound, according to figures from the US-based market research firm ICIS, though some importers have reportedly secured cheaper contracts from European competitors.

According to industry market researcher MarketsandMarkets, rising demand for melamine in the US reflects a broader trend. 

In a report released in mid-2015, the firm said it expects the global melamine market to expand by a compound annual growth rate of 9.9% between 2014 and 2019 to reach $4.4bn in value by 2019.

Market entry

One of the world’s largest methanol producers, MHTL began producing ammonia, urea ammonium nitrate and melamine in 2009 and 2010. At present, the firm has a production capacity of 60,000 tonnes of melamine per annum, around 99% of which is exported – 40% to the North America markets and roughly 60% to Europe.

MHTL’s move into melamine production represented part of a broader strategy to expand both its product range and revenue base, while also increasing T&T’s downstream hydrocarbons capacity.

“The favourable ruling in this dumping and subsidy case demonstrates the strength of a T&T-based organisation in overcoming the many challenges in the industry,” Dennis Patrick, CEO of MHTL, told OBG in early February. “However, despite the success with this trade investigation, gas curtailments continue to hamper T&T’s ability to resume full production of melamine.” 

As a result of decreased gas production in the country, some companies have seen gas curtailments – shortfalls on delivery contracts – reach as high as 15% of daily contract quantity, the Energy Chamber of T&T reported in late 2015. 

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