Less volatile input prices are expected to slow price growth for drilling and exploration equipment
Los Angeles, CA (PRWEB) November 23, 2013
Drilling and exploration equipment has a buyer power score of 3.3 out of 5. This score reflects the volatility of external drivers and input prices and also suggests that suppliers can be somewhat flexible with their prices. However, the low market structure score, which incorporates measures of the availability of substitutes, market share concentration and switching costs, suggests that it can also be tough for purchasers to effectively negotiate lower prices. Demand for drilling and exploration equipment heavily depends on housing starts and electric power consumption. According to IBISWorld procurement analyst Agiimaa Kruchkin, “the recent global economic crisis sent the number of housing starts on a precipitous decline, causing demand for drilling and exploration equipment to plummet”. Similarly, businesses and households cut their electric power consumption, harming demand for uranium-sourced electricity and, hence, the required exploration equipment.
Nevertheless, the ongoing economic recovery is fueling demand for drilling and exploration equipment from major downstream markets, particularly construction. Also as a result the recovering economy and construction sector, the price of steel, the primary input into drilling and exploration equipment, grew in the three years to 2013. “Rising steel prices caused prices for drilling and exploration equipment and related products to grow at an average annual rate of 3.0% in the three years to 2013, further eroding buyer negotiating power,” says Kruchkin.
Volatile steel prices and fluctuating demand from downstream markets create an unpredictable purchasing environment that weakens buyer power. Drilling and exploration equipment suppliers have moderate average profitability, and the volatility of primary inputs like steel makes margins unstable. As a result, prices for equipment are often in flux as suppliers try to maintain profitability. Suppliers' constant fight to protect profit severely limits their price flexibility. Nevertheless, bulk purchases and supply agreements provide buyers with potential cost savings, as volume discounts can reduce per-unit prices and supply agreements can shield buyers from future price spikes. The four largest suppliers in the market are Atlas Copco, Cameco Corporation, Joy Global and Caterpillar.
For more information, visit IBISWorld’s Drilling and Exploration Equipment procurement research report page.
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IBISWorld Procurement Report Key Topics
This report is intended to assist buyers of drilling and exploration equipment. Types of drilling and exploration equipment include water well drilling equipment and uranium exploration equipment. Water well drilling equipment is used to drill functional water wells for drinking water, irrigation systems, sprinkler systems, ponds, swimming pools, geothermal heating and cooling systems. Uranium drilling equipment is used in the exploration of uranium, namely in the processes of open-pit and underground mining.
Recent Price Trend
Product Life Cycle
Total Cost of Ownership
Supply Chain & Vendors
Supply Chain Dynamics
Supply Chain Risk
Market Share Concentration
Vendor Financial Benchmarks
Buying Lead Time
Key RFP Elements
Buyer Power Factors
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IBISWorld is one of the world's leading publishers of business intelligence, specializing in Industry research and Procurement research. Since 1971, IBISWorld has provided thoroughly researched, accurate and current business information. With an extensive online portfolio, valued for its depth and scope, IBISWorld’s procurement research reports equip clients with the insight necessary to make better purchasing decisions, faster. Headquartered in Los Angeles, IBISWorld Procurement 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.