Chemical Monitor

Selling prices in the chemical industry have gained momentum and have risen sharply since the beginning of the year. A wide range of products have shown gains, especially pharmaceuticals and intermediate chemicals.

During January, the index for chemical products rose by 0.9%, compared with a gain of only 0.1% in December. The underlying yearly trend is up 2.6%. Pharmaceuticals went up 1.1% in January having been static in December.

The increase in chemical prices is mainly due to escalating production costs, which rose by 0.3% in January, following a similar increase in the previous month. Production costs are higher than a year ago, although the increase has been limited to an average of 1%.

The recent increase in costs has been caused mainly by the jump in oil prices, resulting from the worries about the Middle East situation and the continued strikes in Venezuela. The price of crude oil rose 6.5% in January and by 41% on an annual basis.

Certain imported raw materials have also been higher, especially imported metals, up by 0.4% in January, and imported chemicals which rose by a similar rate.

Costs for pharmaceuticals have risen by 0.4% in January as against 0.1% in the previous month. Intermediate product costs advanced by 0.3% at the beginning of the year, resulting in a rise of 2% on an annual basis.

Evidently, the impact of oil price increases have not been fully felt in the chemical industry, but the situation could worsen if hostilities were to break out in the Middle East. Many chemical companies may therefore face even more difficult times, and may not be able to push up their prices sufficiently to counteract the impending increases in production costs over the medium-term.