Raw material cost surge puts brakes on growth - German chem group

10 February 2011 17:28  [Source: ICIS news]

TORONTO (ICIS)--The dramatic increase in raw material costs is slowing the speed of growth in Germany’s economy and poses an increasing challenge for the country’s chemical producers, a trade group said on Thursday.

The group, Wiesbaden-based chemical employers association BAVC, said oil prices were at a two-year high, hovering again at the $100/bbl mark.

Rising oil prices were a key worry for the industry as more than 90% of Germany’s chemical production was based on hydrocarbon feedstocks - primarily oil and oil derivatives, the group said.

At the same time, world market prices for natural rubber and rare earths were also “shooting up,” the group said.

Over the course of 2010, the raw material situation had significantly worsened in many of the chemical industry’s key applications, such as plastics, fibres, detergents, paints and coatings, adhesives, building materials, and also pharmaceuticals, the group said.

“The rise in raw material costs poses a particular challenge for Germany’s chemical production,” the group added.

BAVC said the raw material price surge was driven by the global economic recovery and in particular by China’s growth.

At the same time, supply curtailments in some materials – especially rare earths – had driven up prices.

Another factor was the increase in “cheap money” as central banks had increased liquidity in the wake of the economic crisis.

Germany’s economy is forecast to grow 2.3% in 2011 from 2010 while Germany’s chemical industry production growth has been forecast at 2.5% this year.

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By: Stefan Baumgarten
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