Chemical Monitor

Input costs for the chemical industry showed a fall recently. However, it is believed that this drop is only temporary and is mainly due to the marked fluctuations in the price of crude oil in world markets.

In June, the price for raw materials and fuel dropped by an average of 0.4% in the chemical sector as against a rise of 1% in the previous month. The underlying trend for chemical costs has also been subdued, increasing by only 0.6% compared with the corresponding period in the previous year.

A major factor behind this decline in costs has been the recent movement in oil prices. They declined by 7.7% in June but since then the cost of crude oil has shown a significant increase.

Imported chemicals also declined by 0.7% in June, while imported metals dropped by 1.6% in this period. The price of fuel, excluding crude oil, has been variable and ended the month with a fall of 0.8%.

Costs of intermediate chemicals declined by 0.4% in June as against a rise of 1.3% in May. Costs of pharmaceuticals were easier, dropping by 0.1% in June compared with a gain of 1% in May; on an annual basis, they have risen by only 0.3%.

Selling prices were slightly higher, with a gain of 0.1% in June as against a rise of 0.4% in May. On an annual basis, prices have risen by only 0.6% in value.

Pharmaceutical prices remained stable in June, although they are 1.7% higher than a year ago. Selling prices of intermediate products went up by 0.3% in June having already risen by 0.8% in May, though they were 0.4% lower than a year ago.

Fluctuations in chemical costs are expected to continue in the coming months, so manufacturers will have to be extra careful with their pricing policy for certain products. Production costs will probably show a rising trend over the medium term and profit margins may be squeezed as a result.