The price of grease has risen over the past three years due to volatile crude oil prices and pent-up demand from the recession
Los Angeles, CA (PRWEB) March 30, 2014
On a scale of one to five, with a higher number indicating better negotiating conditions for buyers, greases have a buyer power score of 2.6. “This score reflects the fact that neither buyers nor suppliers command an overwhelming amount of leverage when it comes to negotiating supply agreements,” says IBISWorld procurement analyst Sean Windle. Grease products are largely differentiated by their viscosity, base oil type, additives and price; however, the vast majority of these grease characteristics are standardized among suppliers. As such, the low level of specialization among greases benefits buyers. Furthermore, while a number of large suppliers exists, about half the vendor market comprises small and medium-size suppliers. This fact gives buyers a plethora of options from which to choose when sourcing greases, including manufacturers, wholesalers, retailers and other resellers.
Factors that diminish buyer power include the cost-plus pricing model utilized by many suppliers, which prices grease products based on the cost of materials plus a profit margin or range on top. “While this pricing model provides excellent transparency, it shifts the burden of responsibility for rising input costs to the buyer,” says Windle. Considering the double-digit gains and volatility of crude oil prices, a major input into grease production, over the past three years, buyer power has suffered. In the three years to 2013, the price of crude oil has soared at an annualized rate of 8.4% to $101.30 per barrel, up from $79.60 per barrel in 2010. These additional costs have been passed on to buyers in the form of high grease prices. Over the past three years, the price of greases has risen considerably.
Also limiting buyer power is the lack of substitutes for grease. In limited scenarios, oil lubricants can be used in place of grease; however, the vast majority of buyers require grease because of its viscosity and long-term lubrication performance. Major vendors in this market include ExxonMobil Corporation, Royal Dutch/Shell Group, Chevron Corporation and Ashland Inc.
For more information, visit IBISWorld’s Greases procurement category market research report page.
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IBISWorld Procurement Report Key Topics
This report is intended to help buyers of greases, a type of semisolid lubricant consisting of oil and a thickener that acts like a sponge to retain the oil. Other ingredients can be added to grease, including rust inhibitors and oxidation preventatives. Because of its thicker consistency, grease has a longer working life than liquid oil lubricants and can perform better under high temperatures. This fact makes greases a popular choice for heavy machinery and other industrial equipment, which is hard to take apart and expensive to maintain. Furthermore, silicone greases are often used to lubricate rubber components due to oil’s corrosive effect on rubber. Suppliers include retailers, wholesalers and, primarily, manufacturers.
Recent Price Trend
Product Life Cycle
Total Cost of Ownership
Supply Chain & Vendors
Supply Chain Dynamics
Supply Chain Risk
Market Share Concentration
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.