Chemical monitor

Selling prices in the chemical sector continued their gradual fall, benefiting from lower input costs as well as declining raw material prices.

In February, chemical prices fell by an average of 0.2%, following reductions of 0.1% in January and 0.2% at the end of 2001. The longer term trend is also lower, down by an average of 1.5% compared with a year ago.

Pharmaceuticals prices fell by only 0.1% in February as against a drop of 0.8% in January. However, the decline for intermediate products gathered speed, with a fall of 0.9% in February compared with 0.4% in January. On an annual basis, intermediates prices are 5% lower than in 2001.

Evidently, the industry has benefited from lower chemical costs, which dropped by 0.1% in February, compared with a fall of 0.3% in January. The underlying trend in input costs has shown a decline of 3.2%, resulting in improving margins for certain products, although competition has remained fierce in most sectors.

The decline in pharmaceutical costs has been fairly limited, averaging 0.1% in February and 1.5% on an annual basis. However, for intermediate products costs have fallen more quickly, averaging 0.2% in February and 5% compared with a year ago.

Fuel costs fell by 1.9% in February. In addition, costs of imported chemical materials were 0.6% lower, though costs for other imported products, especially metals, were largely unchanged.

The outlook for the chemical industry appears more promising in terms of cost and price movements. Pressure on margins could ease in the coming months, especially as the chemical sector will show a gradual improvement in trading activity over the next six months.