Despite volatile raw material costs, downstream demand will stay relatively constant
Los Angeles, CA (PRWEB) November 25, 2012
The Organic Chemical Manufacturing industry has expanded over the five years to 2012. The industry, which provides raw materials to different industries like plastic, paint and adhesive manufacturing, is expected to increase at an average annual rate of 4.3% to $125.0 billion over the five years to 2012, according to IBISWorld industry analyst Radia Amari. Although the recession lowered demand from end-use customers that caused revenue to drop in 2009, the industry has benefited from increasing demand and consumer spending, with large jumps in revenue occurring before the recession set in.
The economic downturn caused many of the industry's customers to reduce their production levels as consumer spending fell and the housing and construction sectors – key buying markets for the industry – declined. Additionally, changing raw material costs, including oil prices, which rose at an annualized rate of 8.2% over the five years to 2012, compressed industry margins. However, the economy began to recover in 2010, with higher manufacturing levels increasing demand for organic chemicals. In line with these trends, revenue for the Organic Chemical Manufacturing industry in 2012 will increase 4.0%, as demand from customers strengthens. “However, it will be limited by higher raw material prices in the form of oil,” Amari says. “That said, higher selling prices that offset feedstock costs, together with increased demand for exports and a decline in establishments, will increase industry profit in 2012.”
Over the five years to 2017, IBISWorld expects industry revenue to grow. Demand from key buying industries will expand, driven by higher consumer consumption and an increase in exports. While industry revenue will increase, rising input costs and potential government regulation will put downward pressure on profitability. Because of rising material and operating costs, companies will close underperforming plants and improve production facilities that make the cut. During this period, manufacturing facility numbers are expected to decrease at an average annual rate of 2.2% to 712. However, the Organic Chemical Manufacturing industry has a very low level of concentration. According to the US Census Bureau, about 46.9% of industry companies have fewer than 20 employees, while 76.0% of companies have fewer than 100 employees. Additionally, low barriers to entry, including moderate technological change, will support a low market concentration over the next five years. For more information, visit IBISWorld’s Organic Chemical Manufacturing in the US industry report page.
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IBISWorld industry Report Key Topics
This industry manufactures basic organic chemicals (other than petrochemicals), industrial gases and synthetic dyes and pigments. Key product groups include gum and wood products, cyclic crudes and intermediates, ethyl alcohol and other basic organic chemicals. These products are predominantly intermediates that are used as raw material inputs by other manufacturing industries in the production of downstream products.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
About IBISWorld Inc.
Recognized as the nation’s most trusted independent source of industry and market research, IBISWorld offers a comprehensive database of unique information and analysis on every US industry. With an extensive online portfolio, valued for its depth and scope, the company equips clients with the insight necessary to make better business decisions. Headquartered in Los Angeles, IBISWorld serves a range of business, professional service and government organizations through more than 10 locations worldwide. For more information, visit http://www.ibisworld.com or call 1-800-330-3772.