Chemical monitor: November 2005

Chemical prices have been steady recently, recording only limited rises. Evidently, competition in the industry has been intensifying and many manufacturers have been unable to push up their prices significantly, despite the continued increase in intermediate costs.

During August, the index for selling prices moved up marginally by 0.1% following a gain of 0.8% in the previous month. However, the underlying trend has continued upwards, with a rise of 5.7% compared with a year ago.

Prices for intermediate products advanced by 0.4% in August following a gain of 0.2% in the previous month. On an annual basis, the increase for intermediate chemicals averaged 8%, though prices for other products were variable. Thus, although pharmaceutical prices were static in August, compared with a year ago they actually declined by an average of 3.5% in value.

Production costs in the chemical industry have been mixed, recording a small drop of 0.1% in August, but rising on an annual basis by an average of 9%. Fuel costs have remained high, with oil prices up by 8.5% during August, and 51% higher than a year ago. However, for certain imported products the trend was lower: imported bulk chemicals fell by 0.6% in August, while imported metals fell by a similar percentage.

In terms of individual products, pharmaceuticals costs were lower; they declined by 0.4% in August, having been static the previous month, but were marginally higher - up 1.6% - than the corresponding period in the previous year. In contrast, intermediate products saw their costs move up by 0.3% following an increase of 0.8% in July, and resulting in a rise of nearly 10% on an annual basis.

The trend for margins has varied according to the product groups concerned. Thus, for pharmaceuticals, a slightly better trend has emerged for profitability, but for intermediate products there was still considerable pressure on margins for most chemical manufacturers.