Oil drop will not cut raw material bills - bank

22 August 2008 14:39  [Source: ICIS news]

LONDON (ICIS news)--A drop in crude oil prices will have little effect on the raw materials bills of European chemical producers with the relationship driven primarily by sentiment, investment bank Credit Suisse said on Friday.

One fear was that price increases for chemicals would be increasingly difficult, with oil prices coming off the high and into weakening demand, it said in a note to investors.

The crude price has dropped back to around $120/bbl after record highs pushing close to $150/bbl, but it remains more than twice the historic 10-year average.

"Price increases have been the saving grace of many of these companies, with the oil price as an excellent public indicator of rising raw materials prices," said Credit Suisse.

"With this prop gone, price increases could become philosophically harder," it added.

Out of the major list of chemicals firms, BASF, Clariant, Akzo Nobel and DSM would benefit most from an easing of oil prices, said the bank, although this would be reduced for BASF due to its oil and gas business.

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By: Mark Watts
+44 20 8652 3214

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