Chemical monitor

Costs of materials and fuels in the British chemicals sector have continued to fall for many products, a trend that may persist for some time. Imported raw material prices eased and profit margins have improved as a result.

The index for costs of materials and fuels fell by 0.2% in September, a similar change to the previous month. The longer term trend has also been downward, with production costs declining by 0.9% compared with a year ago.

Costs of imported products were lower – especially metals, which declined by 2.7% in September. Certain imported raw material prices fell by 0.7% but the cost of crude oil went up by 0.2%. Other fuel costs were also higher, increasing by 1.6%.

Pharmaceutical costs were stable in September and have shown little change in recent months. However, costs for intermediate items declined by 0.2%, having fallen by 0.1% the previous month, and by 0.9% compared with the same month a year ago.

In contrast, the index for chemical prices showed a small increase of 0.1% in September as against a fall of 0.1% in August. However, prices have tended lower in the longer term, down 0.3% compared with September 2000.

Prices for pharmaceuticals recorded an above-average increase of 0.3% in September, having been unchanged in August. The main reason for the rise has been the continued increase for adhesive dressings, which jumped by 4% in September and by more than 20% compared with a year ago. Intermediate product prices rose by 0.1% compared with a fall of 0.1% in August; this increase was led by organic products.

The British chemical industry is facing more difficult trading conditions and may slow down significantly. However, the fall in production costs will improve margins gradually for certain products. Moreover, oil prices are expected to remain fairly low for some time due to the possibility of a world recession. A steady improvement in profit margins may therefore be seen, despite predicted fluctuations in demand for certain products over the next few months.