Chemical Monitor

Prices in the chemical industry have tended lower recently. For some products, especially intermediate chemicals, the fall was quite pronounced, even though some chemical costs have now started to rise again.

During August, the chemical price index dropped by an average of 0.4%, compared with a rise of 0.2% the previous month. However, selling prices were still up by 0.6% on a year ago for the chemical sector as a whole.

Intermediate product prices, fell by an average of 1% in August as against a rise of 0.4% in July. A major drop was recorded for inorganic chemicals, and organics were also lower in this period. Prices for essential oils were easier, but those for pharmaceuticals remained stable in August, having been static over the previous two months.

The drop in chemical prices was somewhat surprising, especially as production costs were slightly higher in this period. However, competition in the chemical industry has been increasing and some manufacturers, especially those involved in heavy chemicals, have had to cut their prices as a result.

Chemical costs went up by 0.1% in August, having fallen by 0.5% in July. Compared with a year ago, production costs were up by 0.6%, although considerable variations in cost movements were seen in this period. Crude oil prices went up by 6.6% in August, while certain imported products also increased, notably imported metals. But imported chemical prices were slightly lower, down 0.1% in August.

Pharmaceutical costs went up by 0.1% in August and by 1.2% on an annual basis. Costs of intermediate products have also risen: by 0.1% in August and by 0.9% compared with the corresponding period in 2002.

Profit margins in the chemical industry are still quite adequate for many products. However, they could narrow in the coming months if prices were to fall further. Moreover, some production costs are expected to rise more rapidly, as the price of crude oil is likely to gain further momentum in the medium term.