Recovery in the manufacturing sector will drive demand for inorganic chemicals.
New York, NY (PRWEB) February 11, 2014
Inorganic chemicals (including mineral acids, ammonium sulfate, titanium dioxide and carbon black) are often used as raw materials in manufacturing processes, such as the production of paint, glass, paper, rubber and alumina. Accordingly, the need for inorganic chemicals is driven by demand from industries that use these secondary products. When demand for manufacturing and construction collapsed during the recession, so did the demand for products made from inorganic chemicals. However, some purchasers of industry products rebounded quickly (e.g. alumina producers), stimulating the need for inorganic chemicals. Consequently, in the five years to 2014, IBISWorld expects Inorganic Chemical Manufacturing industry revenue to increase an annualized 5.4% to $39.2 billion, including an anticipated 2.5% increase in 2014 as the economy continues to recover.
In 2009, the industrial production index fell 11.3% as the economy collapsed, and industry revenue followed suit, declining 16.4% that year. However, the manufacturing sector promptly began to rebuild, boosting demand for inorganic chemicals throughout 2010 and 2011. Moreover, exports have grown at an annualized rate of 2.7% since 2009, as a result of a weak dollar that kept domestically produced chemicals relatively cheap in international markets. According to IBISWorld Industry Analyst Jocelyn Phillips, “Amidst the volatile economic environment of the past five years, profit margins for energy-intensive chemical manufacturers have benefited from steady electricity prices and low domestic natural gas prices.”
In the five years to 2019, the industry will expand as demand from downstream industries continues to increase. Moreover, as the automobile sector recovers, tire and rubber manufacturers will demand more carbon black from industry producers. Similarly, as other chemical manufacturing industries rebound in the next five years, demand for industry-produced chlorine (a major input in chemical manufacturing processes) will increase as well. Furthermore, despite an increasing trade-weighted index, exports will remain steady, as demand for more chemicals manufacturing and construction increases, due to the recovering global economy.
“Typically, industry firms specialize in a few specific products, limiting the overall market share each firm can control,” says Phillips. During the recession, some firms consolidated to increase production capacity and improve operating efficiency. Firms have also merged to jointly pursue new technology and products, such as more energy efficient machinery and chemicals. Also, firms previously experiencing stagnation due to high energy costs have been given new life due to low natural gas prices in the United States. Falling natural gas prices boosted the profitability of many firms, making them more attractive acquisition targets. As a result, market share concentration has steadily increased over the past five years.
For more information, visit IBISWorld’s Inorganic Chemical Manufacturing industry in the US industry report page.
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IBISWorld industry Report Key Topics
The Inorganic Chemical Manufacturing industry produces basic inorganic chemicals including titanium dioxide, chlor-alkali products and carbon black. Inorganic chemicals are mineral-based, while organic chemicals are carbon-based (see IBISWorld report 32519, Organic Chemical Manufacturing). Inorganic chemicals are largely used as inputs in manufacturing and industrial processes. Inorganic chemicals used as pigments and dyes (IBISWorld report 32513) or pesticides (IBISWorld report 32532) are not included in this industry.
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