How does China's melamine capacity expansion affect the domestic supply-demand balance?

China's melamine market is facing severe oversupply. Domestic production has been running at roughly 1.5 times consumption for three years, with capacity reaching 2.6 million tonnes in 2025 while output was only 1.4 million tonnes, implying an operating rate near 54%. The main demand driver is the construction-linked downstream sector—over 80% of melamine goes into wood-based panels, impregnated paper, and adhesives for furniture and interior decoration. That sector has been contracting since 2018, and prices fell 15% in 2024 alone. Despite weak demand, Shandong Shuntian Chemical has aggressively expanded, adding multiple 50,000-tonne lines since 2021 and targeting 330,000 tonnes of capacity by mid-2025. This counter-cyclical build-out intensifies competition and keeps pressure on margins for existing producers.