Volatile steel prices and the tumultuous housing market severely harmed revenue
Los Angeles, CA (PRWEB) July 20, 2012
The performance of the Oven and Stove Manufacturing industry hinges most significantly on the level of activity in the residential construction sector, specifically with the number of new housing starts. Over the past five years, the housing market crash and subsequent recession hampered demand for newly manufactured ovens and stoves. At the onset of the housing market crash, fewer homeowners and a significant decline in the number of new housing starts created a severe decrease in demand for ovens and stoves. Additionally, the recession curbed consumer demand for industry products as most consumers generally curtailed all spending in light of dwindling disposable income, higher unemployment and limited access to financing, according to IBISWorld industry analyst Tony Danova. As a result, industry revenue is expected to fall at an annualized rate of 6.4% to roughly $3.4 billion over the five years to 2017. In addition to a slumping residential construction market, firms in the Oven and Stove Manufacturing industry were subject to the extreme volatility in the world price of steel, a key input in the production of stoves and ovens. IBISWorld estimates that over the five years to 2012, the world price of steel has grown 3.6% per year on average. Despite this upward growth, steel prices have been extremely volatile, as exhibited by 20.6% growth in 2008 followed by 25.1% decline in 2009. This volatility put immense pressure on industry firms' bottom lines, Danova says. As a result, average industry profit margins fell from 2007 to 2012.
Over the next five years, the Oven and Stove Manufacturing industry will benefit from the generally improving economic climate and its positive effect on productivity in the residential construction market. For example, the number of housing starts is expected to grow immensely over the next five years, at an annualized rate of 10.8%. This trend is having an immediate effect on the industry, with revenue growth of 0.5% expected during 2012. This will restore demand for newly manufactured ovens and stoves. In addition, growing consumer disposable income will help boost demand for the replacement oven and stove market. Consumers will become more willing to invest in new appliances as they increasingly return to work.
Industry concentration measures the extent to which major players dominate an industry. The four largest producers of core appliances in the United States (Whirlpool, General Electric, Electrolux and LG Electronics) account for the majority of the market. Whirlpool has the largest share of the industry following its 2006 acquisition of Maytag. Consolidation among producers facilitated increasing prices in 2005 to offset higher costs for raw materials. The major producers are increasingly relocating production to low-cost countries such as Mexico. For more information, visit IBISWorld’s Oven and Stove Manufacturing in the US industry report page.
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IBISWorld industry Report Key Topics
This industry manufactures a wide variety of ovens, stoves, ranges and other cooking equipment for home use. These products generally come in gas and electric form. This industry does not include microwaves, toaster ovens or commercial ovens.
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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