A strong uptick in demand from downstream construction markets will revive the industry.
Los Angeles, CA (PRWEB) October 26, 2013
The Asphalt Manufacturing industry produces road paving and building construction materials, and was heavily impacted by the reeling residential and nonresidential building markets over the past five years. The housing market collapse led to a reduction in demand for asphalt roofing materials, hampering revenue growth. Over the five-year period, industry revenue fell. However, 2013 marks a projected return to steady growth, as downstream construction markets continue their recovery. In 2013, a strong upturn in housing starts indicates renewed strength in the building materials markets. Consequently, revenue for asphalt manufacturers in 2013 is projected to rise.
According to IBISWorld Industry Analyst Hayden Shipp, “Government funding for highway construction mitigated the recession's impact on asphalt manufacturers.” In addition to steady funding from multi-year acts, the federal government aided the industry at the height of the recession by passing the American Recovery and Reinvestment Act in 2009. The act provided $27.5 billion with the purpose of improving the nation's surface infrastructure, thereby increasing the demand for asphalt. While government funding for highways is projected to increase during the five years to 2018, concerns about the national debt could potentially curtail future spending.
“Industry profit margins are expected to remain steady in the near term,” says Shipp given that this is a mature industry with many small companies and limited opportunities for consolidation. Profit margins are also constrained by the high level of price-based competition experienced by industry participants. Moreover, asphalt production requires bitumen, a by-product of oil refining that acts as a binder. Industry profitability is therefore particularly susceptible to petroleum prices, which were volatile over the period. Consequently, during the recession, operators tried to combat profit loss by cutting down on employment numbers, and from 2008 to 2013 employment has dropped.
Generally, the Asphalt Manufacturing industry has a low level of market share concentration, with the top four companies (including CRH plc and Owens Corning Sales) accounting for more than 10.0% of industry revenue (see IBISWorld report 32412 for major player market shares). The remaining share of the market is mainly composed of small players that cater to local demand. IBISWorld estimates that in 2013, companies will compete for the remaining share of industry revenue. In the five years to 2018, IBISWorld anticipates the industry will experience consistent growth, and industry revenue is expected to rise during the period. The industry will also benefit from an increase in highway construction, a boost in housing starts and a rise in nonresidential construction value, all of which will bolster demand for asphalt.
For more information, visit IBISWorld’s Asphalt Manufacturing in the US industry report page.
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IBISWorld industry Report Key Topics
Industry operators manufacture paving and roofing materials, including asphalt and tar-paving mixtures and blocks, shingles, roofing cements and coatings. These products are produced from purchased asphaltic materials, paper mats and felts. Operators do not refine the crude petroleum or produce the paper mats and felts that go into their products. Companies that conduct such services are included in IBISWorld’s Petroleum Refining (32411) and Paper Mills (32212) reports.
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