Industry revenue will benefit from recovering downstream construction markets.
Los Angeles, CA (PRWEB) August 17, 2013
The Asphalt Manufacturing industry has struggled over the past five years due to low expenditure on private sector construction. The US housing crisis dragged down the domestic housing market, with residential construction spending falling 5.8% over 2008. In 2009, the industrial sector took a hit during the recession, causing nonresidential construction investments to contract 18.7%. As a result, industry revenue decreased 3.8% that year, and another 8.2% in 2010. “Since then, however, revenue growth has steadily recovered, driven by strong government investments in road and highway construction,” IBISWorld industry analyst David Yang says. In the five years to 2013, IBISWorld expects industry revenue to increase at an average annual rate of 0.4% to $4.1 billion.
Government infrastructure funding was critical for industry growth over the past five years. The Building Canada Fund, the Infrastructure Stimulus Fund and the Canada Strategic Infrastructure Fund provided a combined $17.1 billion for infrastructure projects, which greatly bolstered road and highway construction activity during the past five years. “As a result, demand for asphalt concrete, blocks and paving products increased, translating into revenue growth for industry operators,” Yang says. However, government funding projects were mostly short-term stimulus initiatives. In 2013, government funding is expected to rise at a sluggish 0.4% rate. As a result, industry revenue is expected to grow only 0.6% over the year.
The Asphalt Manufacturing industry has a low level of market share concentration. Currently, Lafarge and Holcim Canada are the industry’s largest companies. For the most part, high transportation costs make it difficult for firms to ship products across the country, thereby limiting each company's market share. High transportation costs typically make acquisitions costly. Husky Energy is the only dominant asphalt producer in Canada. However, the company produces asphalt through its petroleum refinery and is not included in this industry (see IBISWorld report 32411CA). Over the past five years, market share concentration has remained relatively steady. A moderate influx of new operators was matched by revenue growth.
Over the next five years, the industry is projected to grow strongly as downstream demand picks up. In particular, residential construction expenditure is expected to grow. After a brief housing bubble scare in 2013, housing construction and renovation spending will expand, fuelling demand for asphalt shingles and roofing products. Industry firms will also benefit from the recovering US economy, which will boost asphalt roofing product exports to the United States. As a result, IBISWorld forecasts that industry revenue will grow. For more information, visit IBISWorld’s Asphalt Manufacturing in Canada industry report page.
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IBISWorld industry Report Key Topics
This industry manufactures paving and roofing materials, including asphalt and tar-paving mixtures, blocks, roofing cements, coatings and shingles produced from purchased asphaltic materials and coal tar. This industry excludes asphalt paving products directly produced from petroleum refineries.
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