The first offer from a South Korean paraxylene producer to end-users in China has been made at a premium of $21/mt, up $25/mt from 2018's common settlement level at a discount of $3/mt, sources close to the matter said Monday.
A major Japanese PX producer had also launched their offer for the term contract at plus $15/mt, an end-user.
The contracts are typically based on a mix of the monthly settlement of the Asian Contract Price as well as the monthly average of Platts CFR Taiwan/China assessments, and a premium or discount.
The steep rise in the offered premium for 2019 is likely due to the unusually firm PX market of late, with the CFR Taiwan/China assessment hitting a four-year high of $1,371.33/mt on August 30.
The margins have also soared for PX, with the spread to naphtha hitting a high of $686.38/mt on September 3. The last time the spread was wider was on February 28, 2013, then at $688/mt.
However, prices and margins have shrunk since then, and the PX-naphtha spread was last assessed at $589.46/mt on November 9, but still remains unusually high and profitable for producers.
The firm margins are mainly a result of restarted and new PTA plants in China and Taiwan in late 2017 and early 2018, which increased demand for PX.
"It's helpful that the PX market is weaker now, but negotiations will be tough," a source with a Chinese purified terephthalic acid producer said Monday. Several other market sources in PX and among the end-users in the PTA market have recently said that the negotiations for the 2019 PX term contracts are likely to be difficult and time consuming due to a big difference between buyers' and sellers' ideas for the coming year.
So far no bids had been confirmed for the negotiations, sources said.
Chinese PTA producers are expected to start up several large new PX plants as well as refineries next year, which could have a negative impact on PX imports to China as well as PX production margins, but the exact timelines for the start-up of the PX plants remain unclear and several market participants have said that delays are likely to happen. Market sources earlier said that PX margins are likely to remain high in the first half of 2019.
