Chemical monitor

Selling prices for chemicals have shown a mixed trend recently. They were affected by increasing competition for certain products in the UK. In December 2000, the index for chemical prices recorded a fall of 0.2%, following stable prices in the previous month. The underlying trend for prices slowed down, and compared to the corresponding period in 1999, they moved up by only 1.3%. Pharmaceuticals prices fell by 0.3% in December, even though there was a significant increase for adhesive dressings at the end of 2000.

Intermediates showed an increase for inorganics but organic products were lower, partly due to the falling price of crude oil. Competition in the UK has been intense and many manufacturers have reduced prices in recent months. Profit margins have been squeezed as a result and costs increased faster than prices. This gap has narrowed by 0.3% in December and by 2.3% on a longer term basis.

Production costs continued to rise. These increased by 0.1% in December, following a gain of 0.5% in November. In the long term, chemical costs have advanced 3.6% on an annual basis. Crude oil prices fell 18% during December, but other fuel costs increased by 1.8%. Materials and fuels costs fell 0.1% in December.

Intermediate chemicals increased by 0.4% in the month. The slowdown in production costs may be temporary, especially if imported raw materials prices were to rise. Margins will remain tight and firms will be unable to push up prices in the medium term.