11 December 2003 16:04 [Source: ICIS news]
LONDON (CNI)--A significant slice of the UK's chemical industry expects to see production increase in the next three months, according to a Confederation of British Industries (CBI) survey published on Thursday.
The survey showed that 26% of a weighted sample of 57 chemical companies expect production to rise in the next three months. Only 8% are expecting to cut production. Two-thirds believe their output will not change.
The results of the survey - which is conducted monthly - indicated clearly that the industry's mood is becoming more optimistic as the fourth quarter advances. In November, the CBI found only 20% of the UK chemical industry forecasting increased production, while 16% was expecting a dip. And, back in October, the optimists had comprised a mere 9% of the sample, with almost half of respondents foreseeing further falls in production.
But despite the improved December mood, industry still remained sceptical about the scope for price increases. In this month's survey - conducted between 24 November and 8 December - only 15% of the sample expected average prices at which domestic orders are booked to rise. Two-thirds believed prices would remain unchanged within the next three months, while 18% were expecting lower prices.
The survey detected striking mood differences between chemical sectors. While manufacturers of pharmaceuticals and consumer chemicals expect little change in either prices or output for the quarter, the man-made fibres sector appears despondent. None of the three fibre manufacturers who responded to the survey saw any hope of boosting either prices or output in the next three months. Two of the three expected prices to fall again, while one believed output was also set to decline.
The agrochemicals sector was marginally more cheerful, with four out of the five respondents expecting production to remain stable and the fifth expecting an increase. However, they are not so optimistic on pricing, with three respondents expecting further price falls and the other two hoping for price stability at best.
Industrial chemicals suppliers are much more upbeat. Only 5% are expecting output to fall, while 54% are forecasting increased production and 42% no change. Even more significantly, 36% are hoping to raise their domestic prices in the next quarter, 42% expect prices to remain unchanged and only 23% are looking at price cuts.
The industry's improved mood echoed that of the wider manufacturing sector. For the first time since January, slightly more UK manufacturers are expecting production to rise than to fall. Prices, however, are generally expected to continue their downward drift.
The CBI's head of economic analysis Doug Godden said the survey suggests conditions are slowly getting better: "Manufacturers are still facing a really tough uphill battle [but] firms now expect to increase output, albeit by only a little, in the coming months.
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