Chemical Monitor - June 2004

Production costs in the chemical industry have been increasing more rapidly and are likely to speed up even further in the coming months. The latest rise in crude oil prices, which is not yet fully reflected in the cost indices, will have a big impact in the near future, especially for organic products.

The overall index for raw material costs and fuel rose by 0.3% in March 2004. Compared with a year ago, the index has risen by a moderate 1.1%. However, the situation is changing, and over the medium-term chemical costs could speed up markedly.

Pharmaceutical costs fell by 0.1% in March while on an annual basis they rose by 1.5%. The increase for intermediate products was 0.4% in March and an average of 0.6% compared with a year ago.

It appears that fuel costs dropped by 3.6% in March, but for crude oil the trend has been sharply upward, rising by 12% in this period. Since then, oil prices have risen even further on the world markets.

Imported metals showed an increase of 4.8% in March while imported chemicals have gone up by 0.6% recently. Most chemical manufacturers are well aware of these cost increases, including the recent rise in UK bank base rate to 4.25%, but they will have to recoup these higher costs by pushing up their prices.

Recently, selling prices have also gone up but at a moderate rate. The index for chemical prices advanced by 0.1%, which follows the trend of recent months. Compared with 12 months ago, prices have risen by only 1% on average.

In March pharmaceutical prices moved up by just 0.1% and by 1.6% compared with a year ago. Prices of intermediate products advanced by 0.4% in March but were reasonably steady compared with 2003, as the rise in organic prices was counterbalanced by the fall in inorganic products in this period.