As the manufacturing and construction sectors improve, demand for chemicals will pick up.
Los Angeles, CA (PRWEB) December 02, 2013
As a key intermediary within the supply chain, the Chemical Wholesaling industry plays an important role in chemical manufacturing. Chemical wholesalers buy products from upstream manufacturers and redistribute the products as raw materials to other downstream manufacturers that use chemical inputs in certain products. The construction and downstream manufacturing sectors are the key customers for chemical wholesalers, with industry demand relying on their demand and production levels.
The industry's revenue growth has been inconsistent over the five years to 2013. According to IBISWorld Industry Analyst James Crompton, “During the recession, the industry experienced low demand for its products as the construction sector reduced chemical purchases when housing starts plummeted and commercial construction subsided.” The construction sector uses chemicals such as adhesives, epoxies and sealants; therefore, its weak performance negatively affected chemical wholesalers' financial performance. At the same time, consumer spending decreased, and many manufacturing industries reduced production, requiring fewer chemicals. In light of these adverse conditions, revenue has declined slightly at an average annual rate of 0.7% during the past five years.
However, when the economy began to recover in 2010, demand for chemicals returned. Residential construction slowly rose, and related industries, including plastic and resin and paint manufacturing, increased their demand for chemicals. Other manufacturing firms intensified production as well and purchased more chemicals, bolstering industry revenue. As such, in 2013, industry revenue is expected to increase 0.4% to $144.9 billion.
“Looking ahead, the industry is projected to experience higher demand from the downstream manufacturing and construction sectors, which will drive up revenue,” says Crompton. Despite this growth, industry companies will consolidate as a result of consistently tight profit margins. Similar to the past five years, increased government legislation and higher oil prices will continue to raise chemical costs and hurt profitability. Mergers and acquisitions within the industry will likely increase as wholesalers cut costs to improve profit. Because chemical wholesalers have diversified product offerings, no operator holds a dominant share of the market. However, concentration levels have risen modestly in the past five years because of mergers and acquisitions.
For more information, visit IBISWorld’s Chemical Wholesaling in the US industry report page.
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IBISWorld industry Report Key Topics
The Chemical Wholesaling Industry wholesales chemicals and related products, including compressed gas, chemical additives and synthetic rubber, to the manufacturing, construction and mining industries. This industry does not wholesale agricultural and medicinal chemicals, paints and varnishes, fireworks or plastics materials.
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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