The industry’s recovery will depend on demand from the electricity generation sector
Los Angeles, CA (PRWEB) November 13, 2012
The Coal and Ore Wholesaling industry's financial performance is heavily tied to the ruling market prices of coal and metal ores. In turn, prices are determined by demand from downstream manufacturing, utilities and construction industries. When the recession hit in 2009, the price of steaming coal, a key industry product, plummeted 43.4%, forcing mining companies to slash production. Consequently, industry revenue dropped 18.1%. Shielding the industry from further damage, in 2010 and 2011, ore and coal prices quickly rebounded, and increased production allowed the industry to regain its footing. According to IBISWorld industry analyst Agiimaa Kruchkin, “as China's economic growth begins to slow and Europe sinks into recession, prices are expected to fall again.” As a result, IBISWorld expects industry revenue to slide 13.1% in 2012 to total $16.1 billion, contributing to an average annual decline of 3.6% since 2007.
Steaming-coal sales are expected to generate about 63.5% of industry revenue in 2012. The remainder of the Coal and Ore Wholesaling industry’s revenue primarily comes from the sale of coking coal and ores to steel manufacturers, jewelry manufacturers and construction markets. The prices of coal and ores largely govern profit trends for industry players, as lower costs typically allow for higher margins. “While prices of industry inputs are expected to fall over 2012, a shift toward wholesale bypass has been forcing wholesalers to slash their selling prices to attract business from downstream buyers,” says Kruchkin. As a result of these customers sourcing their coal and ore products directly from mining companies, margins for the coal and ore wholesalers are expected to fall slightly to 9.9% in 2012. While most of the major companies in this industry are vertically integrated with mining companies, allowing them to cut down on costs, it will become increasingly important over the next five years for firms to build scale to remain competitive with major players.
Over the five years to 2017, industry revenue is anticipated to expand moderately, despite continued wholesale bypass. Sustained growth will come from stronger domestic demand for coal-generated electricity and increased construction activity, amid the economic recovery. However, growing concern over nonrenewable energy sources, like coal, will slightly harm the industry. Both solar and wind power, for example, are expected to gain a greater portion of the power-generation market over the next five years. As a result of increased competition, companies will need to maintain costs, causing the number of industry employees to increase at stunted rate over the next five years, while the number of firms grows at the even slower pace. For more information, visit IBISWorld’s Coal & Ore Wholesaling in the US industry report page.
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IBISWorld industry Report Key Topics
This industry comprises establishments primarily engaged in wholesaling coal, coke, metal ores and some nonmetallic minerals (except precious and semiprecious stones and minerals used in construction, such as sand and gravel).
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
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