Chemical Monitor - December 2002

Selling prices in the chemical sector have continued to move up, although the increase has been limited recently. However, there has been a significant rise for organic chemicals as a result of the jump in oil prices.

During September, the index for selling prices went up by 0.1%, the same as in the previous month. However, the longer term trend was up by 0.6% compared with a year ago. Even though some production costs have risen sharply, chemical manufacturers have been cautious in pushing up their prices, due to strong competition in the UK market for certain products.

The average rise in prices for intermediate chemicals was just 0.1%, although organics advanced by 0.2% and an above-average increase of 0.4% was reported for glues. Pharmaceutical prices moved up by only 0.1% in September, but there was a significant increase for hormone preparations, which jumped by 1.4%.

The upward trend in chemical costs has persisted, rising by 0.1% in September compared with 0.2% the previous month. Organic chemicals led the way, with a rise of 0.2%, but for other products there was little change.

Fuel costs have been variable in the UK but the crude oil price jumped by 4.5% in September, having risen at a similar rate the previous month. This continued to reflect the political uncertainties in the Middle East region in recent months. Other fuel costs have also gone up but at a more moderate rate, while certain imported materials were lower, notably imported chemicals, which dropped by 0.7% in September.

Chemical manufacturers continue to face an uncertain future over the next few months. Overall activity in the UK is slowing down, with chemical production also being adversely affected. Moreover, selling is proving more difficult - not only in the UK but also overseas, especially in the US and continental Europe. UK chemical firms will therefore have to watch their margins closely and will have to fight hard to maintain their profitability at a reasonable level.