Chemical monitor - September 2003

Selling prices in the chemicals sector have shown little change recently. They have benefited from a small drop in chemical costs, while competitive pressures have made chemical manufacturers cautious about increasing their prices at present.

On average, chemical prices were steady in June 2003, although they were up 2.9% on a year ago. Pharmaceutical prices were up by only 0.9% compared with 12 months ago. Intermediate prices have been slowing down: in May, they rose by 0.4% but in the following month the increase was 0.1%. On an annual basis, they have risen by 5.2%, mainly due to the strong increase for organic products.

Trading conditions in the UK chemical products market have been more difficult and competition has been gathering momentum. Some sectors, including chemicals, have been facing tougher conditions, so that increasing prices has not been an option in many cases.

Margins have improved slightly due to falling costs, but suppliers of chemical products will have to watch the situation carefully.

Chemical costs dropped marginally by 0.1% in June, but were 1.4% higher than a year ago. In May, however, the fall in chemical costs was more pronounced, declining by 0.3%. Costs for intermediate products fell by 0.3% in June following a decline of 0.5% the previous month, but were up by 1.8% compared with a year ago.

Pharmaceutical costs advanced by 0.3%, having been steady in May, while on an annual basis they have increased by 2%.

Production costs in the chemicals sector have been affected by many factors, including the 1.3% drop in fuel prices in June. Imported metals fell by 1.1%, while imported heavy chemicals declined by a similar percentage. However, there has been a significant increase of 5.7% in crude oil prices.

In view of these overall cost trends, chemical manufacturers have been able to keep their prices stable for the time being.