Chemical monitor
Production costs have been falling for some time, and in some cases this downward trend has been accelerating. Feedstock costs in particular are lower, especially for organic chemicals, mainly as a result of weak crude oil prices.
In October, the index for costs of raw materials and fuels declined by an average of 0.2%, a similar rate to the previous month. However, for certain items, the drop has been more pronounced, and compared with the same period a year ago, costs have shown a fall of 2.1%.
The price of crude oil declined by 18.8% in October as a result of a world market surplus and it is possible that this trend may continue for some time. However, other fuels rose by 1.7% in this period. Imported metals declined by 2.5%, and imported chemicals by 0.4%.
On average, costs for intermediates fell by 0.7% in October compared with a drop of 0.2% the previous month. Costs are 3.7% lower than a year ago, with organic chemicals leading the downward trend. Pharmaceuticals costs eased by 0.1%, having been static the previous month, and were 0.4% down on a year earlier.
The latest fall in costs is welcome news for the hard-pressed UK chemical industry. It appears that margins have been improving, even though the market has become very competitive recently. Recent cuts in interest rates have also helped, as the cost of borrowing has fallen appreciably in recent months.
Chemical prices were static in October, after a marginal gain of 0.1% the previous month. But prices have fallen by 0.3% compared with 2000, even though considerable variations in price movements have been reported recently.
Prices for pharmaceuticals were slightly higher, up 0.1% in October following a rise of 0.3% in September. Compared with a year ago, prices were 1.9% higher. Prices for intermediates have shown some fluctuation, dropping by 0.2% in October compared with an increase of 0.1% in September. They showed an increase of 2.8% compared with a year ago, as a result of the marked increase for inorganic chemicals.
At present, the scope for higher prices is strictly limited in the UK market, mainly as a result of the marked slowdown in demand for certain chemical products, and this trend may persist over the next six months.