Chemical Monitor: April 2005

Production costs for the chemical industry have been variable recently, but showed a significant increase at the beginning of the year. A major factor has been the recent jump in oil prices combined with the rise in costs for imported raw materials.

In January 2005, the index for chemical costs advanced by 1% after falling by 0.4% the previous month. Moreover, the underlying trend has accelerated, with a rise of more than 8% on an annual basis.

In the case of pharmaceuticals, costs rose by 0.6% in January against a fall of 0.1% in December 2004, but the underlying trend remained fairly stable, and pharmaceutical costs rose by 2.9% compared with 12 months ago. Costs for intermediate chemicals jumped by 1.2% in January, compared with a fall of 0.5% the previous month. Furthermore, they were 9.6% higher than a year ago, led by sharp increases for some organic products.

The cost of crude oil has increased sharply, rising by 14.8% in January and by 41% on an annual basis. In addition, the costs of certain imported products were higher, especially imported raw chemicals, which advanced by 2.4% in January and by 11% compared with a year earlier.

In January, profit margins in the chemical industry came under considerable pressure following an improving trend at the end of last year. One factor has been the decline in chemical prices, which fell by 0.1% in January, following a rise of 0.4% in December. Nevertheless, the underlying trend for chemical prices continued to point upwards, rising by 4.2% compared with the corresponding period in 2004.

Selling prices for intermediate products continued to move ahead, increasing by 1.1% in January, compared with 1.5% in December. On an annual basis, intermediate products have advanced by 10% in value, although price trends for other chemical products were mixed. Pharmaceuticals prices were under pressure, falling by 2.2% in January after having been relatively stable at the end of last year.