Chemical monitor

Production costs in the chemical sector have continued to rise and have even accelerated in some cases. A major factor has been the significant increase in the price of crude oil, resulting from the worsening situation in the Middle East, in particular the possibility of hostilities with Iraq.

In August, the index for chemical costs advanced by an average of 0.2%, following a similar rise the previous month. However, the longer-term trend showed a fall of 0.7% compared with 12 months ago. A major influence has been the volatile nature of oil prices, which have gone up by 4.5%. Some imported material costs are also higher, although metals and chemicals declined by 0.3% and 0.4% respectively.

Pharmaceutical costs remained steady, as they have over the past few months. However, they were down by 0.4% on an annual basis. Intermediate product costs were up by 0.4%, compared with a gain of 0.2% a month ago.

Chemical manufacturers have raised their prices by a limited amount: 0.1% in August against a gain of 0.5% in the previous four weeks. On an annual basis, too, prices were only marginally higher, up by just 0.1%.

Pharmaceutical prices remained largely unchanged, having fallen marginally by 0.1% in July. Nevertheless, heavy chemical prices forged ahead, with intermediate products increasing by 0.9%, led by a big jump in prices for organic chemicals.

Undoubtedly the situation in the chemical sector will remain volatile, especially if production costs continue to increase at their presence rate. Profit margins will be under pressure for many product groups, while competition will also intensify. In these uncertain times, most chemical manufacturers will have to watch their margins very carefully.