Despite increased operating costs, strong downstream demand will boost revenue
Los Angeles, CA (PRWEB) June 05, 2013
The Petrochemical Manufacturing industry exhibited volatile growth over the past five years. According to IBISWorld industry analyst Radia Amari, “During the recession, demand from the manufacturing sector deteriorated and remained persistently low.” On the other hand, downstream customers like the plastic and resin manufacturing industry recovered quickly after the recession, stimulating demand for this industry's products. A weakened dollar also fueled export growth over the past five years. In the five years to 2013, IBISWorld expects revenue to increase at an average annual rate of 2.4% to $9.7 billion. In 2013, revenue is expected to grow 9.4% as the economy recovers.
Profit margins (i.e. earnings before interest and tax) are slim for the average operator. “The high and rising price of crude oil, which represents a key input in most industry products, has cut into industry profitability over the past five years. Coupled with intense competition, this scenario makes for a tough operating environment,” says Amari. Industry participants face external competition from imports. Imports satisfy about 11.2% of the domestic demand for petrochemicals. As the Canadian dollar has appreciated, gaining strength against its trading partners' currencies, foreign-made goods have become relatively cheaper domestically. In 2010, the Canadian dollar gained significant strength over the US dollar, causing imports to jump. IBISWorld anticipates this trend will continue over the next five years as the domestic currency continues its upward trend. Imports are expected to increase at an estimated annualized rate of 3.3% over the five years to 2018.
The Petrochemical Manufacturing industry has a low level of market share concentration. In 2013, the top four players account for less than an estimated 10.0% of industry revenue. In addition, the majority, or about 83.4%, of industry companies employ less than 100 people, although industry concentration has gradually increased. The departure of smaller players that cannot adapt to the changing operating environment brought on by the recession has aided this concentration process. Over the five years to 2013, the number of industry companies has declined at an estimated annualized rate of 1.6% to 12.
Over the next five years, this industry will expand, led by improving operating conditions. Revenue is projected to grow. Unlike the previous five years, revenue growth will be more stable. Demand from key buying industries will remain relatively constant, as will raw-material costs, which will cause revenue to stabilize. That said, increasing regulation could hinder the industry by increasing operating costs. To offset rising costs, industry companies could likely raise prices. Some firms are expected to offshore production to mitigate costs; others will find it difficult to wind down capacity, choosing to sell off establishments too costly to continue operating. Over the five years to 2018, the number of establishments is expected to remain flat at 22.
For more information, visit IBISWorld’s Petrochemical Manufacturing in Canada industry report page.
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IBISWorld industry Report Key Topics
This industry manufactures petrochemicals, which are chemicals derived from petroleum and natural gas. Key products include ethylene, propylene, butylene, benzene, toluene, styrene, xylene, ethyl benzene and cumene. These products are used in the production of consumer products, automotive components and various durable and nondurable goods. Organic compounds like ethyl alcohol and inorganic chemicals like carbon black are excluded from the industry.
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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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 and Canadian 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.