Crude costs drive chem price hikes in 2008 - Fitch

13 December 2007 17:56  [Source: ICIS news]

TORONTO (ICIS news)--Chemical makers will likely focus on increasing their selling prices during the first half of 2008 to help offset higher crude oil and oil product costs, credit ratings agency Fitch said on Thursday.


“Most producers will attempt to restore profitability or regain loss or profit margin as quickly as possible, if not by the end of first quarter 2008,” Fitch said.


“The effect of higher crude oil prices will be seen in fourth-quarter earnings results, and oil price volatility will remain a major challenge as 2008 begins,” it added.


The findings were part of Fitch’s 2008 outlook report for the global chemical industry, released earlier on Thursday.


The global chemical industry continued to face several operating and macroeconomic challenges, including volatile and escalating commodity costs, going into 2008, the agency said.


The weakened US dollar had squeezed the profitability of North American companies worse than their European counterparts, although a weaker dollar also benefited North American producers as higher exports helped maintain operating rates and kept inventories lean, it said.


Fitch also expected further consolidation in the industry as companies were seeking additional diversification or dominance in a particular chemical product segment, it said, without identifying companies by name.


Consolidation could come in the form of alliances and partnerships as opposed to merger and acquisition (M&A) activity, it added.


Over the medium term, 2009 could be “a pivotal year” as oversupply from new capacity additions could cause producers to lose some of their pricing power, Fitch said.


By: Stefan Baumgarten
+1 713 525 2653

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