Revenue has rebounded since the recessionary lows of 2009, but import penetration will limit industry growth.
New York, NY (PRWEB) April 04, 2014
The Lubricant Oil Manufacturing industry produces industrial and automotive lubricants for manufacturers and consumers, including motor oil, transmission fluid, rust inhibitors and machine oils. The industry experienced its share of wear and tear during the past five years, as the global economic downturn led to a drop in consumer income and downstream manufacturing activity. “These factors compelled consumers to drive less and hold off on car expenses, and manufacturers were forced to leave factories idle or close down production altogether,” according to IBISWorld Industry Analyst Jocelyn Phillips. In addition, the collapse of US automakers (this industry's biggest foreign customer) left a massive void in demand. As a result, industry revenue fell 15.9% in 2009. Fortunately for the industry, improved domestic demand and a surge in export growth fuelled by a revitalized US auto industry pushed revenue growth of 8.4% in 2010, contributing to 1.2% annualized growth during the five years to 2014, when IBISWorld expects revenue to total more than $2.3 billion.
However, increasing import penetration (especially from the United States, which accounts for more than three-quarters of the industry's imports into Canada) has significantly limited industry revenue growth. In 2014, imports are expected to account for 55.5% of domestic demand, up from 35.2% in 2009. “Volatile input prices have also negatively affected industry performance, stifling profit growth from 2009 to 2011,” says Phillips. Fortunately for the industry, profit margins finally expanded in 2012 and are expected to remain steady in 2014, thanks to a levelling off in oil prices and strong demand from overseas markets.
Despite recent improvements, industry revenue is expected to decline in the coming years. Increases in domestic demand will likely be largely satisfied by imports, which will continue to capture a greater share of the domestic market. In response, industry manufacturers are expected to continue to shift their focus toward foreign buyers. Additionally, while revenue is expected to fall, industry profit margins will likely experience a boost during the next five years as growth in oil prices stabilizes, and demand from foreign markets continues to grow.
For more information, visit IBISWorld’s Lubricant Oil Manufacturing in Canada industry report page.
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IBISWorld industry Report Key Topics
This industry manufactures petroleum products (except for asphalt paving, roofing and saturated materials), such as blended motor oils, brake fluids, lubricating grease and other oil-based additives. Key buyers include downstream automobile manufacturers, wholesalers and automotive retail chains.
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