Chemical monitor

Margins in the chemical sector have been widening with profits benefiting from lower input costs, despite competitive trading conditions.

During January, the gap between price changes and input costs increased by 0.2% while the longer term trend has also been more favourable. Thus, margins improved by 2% compared with a year ago. A major factor has been the decline in costs for imported raw materials as a result of the significant downturn in world trade. Prices of imported chemicals dropped by 1.5% in January.

At the beginning of this year, the index for raw materials and fuel in the chemical industry dropped by 0.3%. This is a continuing trend as costs are 3.3% lower than a year ago.

Pharmaceutical costs declined by 0.4% in January and by 1.3% on an annual basis. Similarly, intermediate chemicals were down 5.3% compared with a year ago.

Selling prices were also lower, although their drop was less pronounced than for costs. They fell by 0.1% in January as against 0.2% in December, while on an annual basis they were 1.3% easier.

Prices for intermediates declined by 0.4% in January and by 0.6% compared with 2001. For pharmaceuticals, prices were 0.8% lower in January, but 1.4% higher than last year.

In the short term, profit margins could continue to improve steadily, helped by lower costs. However, the situation may change, especially if imported raw material prices go up in the medium term. Chemical firms will have to watch their profitability carefully in the coming months.