Chemical Monitor - November 2004

Production costs in the chemical industry have started to accelerate quite rapidly recently. This trend has been due to the high level of oil prices, combined with the high cost for certain raw materials.

In August, the general index for raw materials and fuels showed an average increase of 1%, having been relatively stable in the previous month. The underlying trend has also speeded up, with an increase of 3.5% on annual basis.

A major feature has been the 1.1% rise in intermediate product costs in August. This compares with an increase of only 0.1% in July, and was up 3.5% over 2003. However, the rise for costs for pharmaceuticals was more moderate - 0.2% higher in August and up 1.4% on a yearly ago.

Oil prices have recorded a significant jump: they went up by nearly 18% in August. The costs of certain other imported commodities were also higher. In particular, metal prices went up by 1.7% in August while costs of imported raw materials advanced by 0.7% in this period.

Profit margins came under significant pressure, as selling price increases lagged significantly behind cost rises. Chemical manufacturers were unable to push up their prices markedly, due to continued strong competition.

The index for selling prices moved up by 0.4% in August, having been static in the previous four week period. However, it has been rising quickly compared with a year ago, with a gain of 3.7% for the chemical sector as a whole.

In August, prices for intermediate products showed an above average increase of 0.7% and were up by 4.2% compared with 2003. In contrast, prices for pharmaceuticals were static in August and advanced by only 1.8% on an annual basis.