Chemical Monitor - April 2004

Profit margins in the chemical sector have improved recently, having been under considerable pressure over the past six months.

Chemical costs were lower in many cases, mainly as a result of the strength of sterling, while selling prices have been rising steadily for certain chemical products.

During January, margins improved by 1.4%, an encouraging development in view of the narrowing trend for profitability in the chemical industry; however, increases in selling prices outpaced a rise in chemical costs by only 0.1% compared with 12 months ago.

Chemical costs fell by an average of 1.3%, compared with an increase of 0.3% in December, although the longer-term trend has seen a rise of 1.9% for the sector as a whole.

The latest fall in chemical costs was mainly due to the drop in prices for imported raw chemicals, which declined by 2.7% in January, mainly caused by the strength of sterling against the dollar, which has made imported products much cheaper. Fuel costs declined by 0.5% but imported metals rose by 0.7% in this period.

Pharmaceutical costs declined by 1.3% in January, having risen by 0.2% the previous month. Costs for intermediate products dropped by 1.5% at the beginning of 2004 following a rise of 0.4% in December last year.

Selling prices have risen slowly, averaging a gain of 0.1% in January as against 0.3% in December. The underlying trend for prices has continued upwards, averaging 2% higher than 12 months earlier.

Prices for intermediate products advanced by 0.6% in January as against a rise of 0.5% in December. Organic chemicals led the way with a gain of 1.2%.

Pharmaceutical prices were also higher, averaging an increase of 0.3% in January after having been static the previous month. There has been a significant rise in prices for certain pharmaceuticals, especially hormone preparations, which jumped by more than 2% recently.