Chemical monitor: September 2005

Already high production costs in the chemical industry have continued to increase rapidly. In contrast, chemical prices have barely moved, putting additional pressure on many manufacturers.

In June, the cost index for the chemical industry advanced by 0.4%, having risen by 0.6% in the previous month. Moreover, the underlying trend also accelerated, showing a rise of 10.8% compared with the corresponding period in the previous year.

In particular, intermediate costs went up by an average of 0.6% in June and by 12% on a yearly basis. The increase for pharmaceutical costs was more moderate, averaging 0.2% in June and 3.5% compared with 2004.

Many factors have contributed to this escalating trend; in particular, crude oil prices went up by 13% in June while those for imported metals advanced by 1.4%. However, certain imported products were priced lower, especially imported chemicals, which dropped by 0.6%.

In contrast, selling prices recorded only slight changes, and were lower in some cases. On average they declined by 0.1% in June, but advanced by 6.4% compared with a year ago.

Pharmaceutical selling prices moved up by 0.2%, but were 3.5% lower than in 2004. The prices of intermediate products were virtually unchanged, rising by just 0.1% in June compared with an increase of 0.6% in May. The average increase for intermediate chemical prices was 9.4% on an annual basis, which was considerably lower than the rise in production costs.

Evidently some chemical manufacturers are facing more difficult trading conditions and their margins are being squeezed on certain leading chemical products.