NAFTA has caused the industry share of imports to rise, pushing revenue down strongly.
New York, NY (PRWEB) May 02, 2014
Operators in the Wire and Spring Manufacturing industry have had to contend with the global recession's lingering effects and increasing import penetration. As a result, revenue has dropped and profit margins have remained thin over the past five years. Industry players have been forced to close down factories and slash employment. While downstream industries have recovered, industry revenue has been slow to follow. Over the five years to 2014, revenue is expected to decline at an annualized rate, including a drop in 2014.
The removal of trade barriers between the United States and Canada via the North American Free Trade Agreement (NAFTA) and the countries' currencies trading near parity caused Canadians to increasingly rely on US products to fulfill their domestic needs. The United States accounts for over half of Canada's total imports, with total imports increasing from a significant proportion of domestic demand in 2009 to an even higher proportion of domestic demand in 2014, thus hurting domestic revenue. According to IBISWorld Industry Analyst Daniel Carusotto, “With exports accounting for a significant amount of industry revenue, industry operators rely on a healthy economy to generate sales.” In the years following the recession, “various central banks implemented stimulus programs to boost the economy, benefiting downstream users (e.g. the automobile and housing sectors),” says Carusotto. Exports are expected to grow at an annualized rate in the five years to 2014.
The Wire and Spring Manufacturing industry operates with a low level of market share concentration. Many of the industry's wire products are used in construction. The subprime debt crisis in the United States dramatically reduced demand for new construction and consequently, wire products. The automotive industry is also a major purchaser of spring and wire products for use in automotive suspensions and seating. In the United States, motor vehicle manufacturing revenue fell in 2009, which helped decimate demand for the Canadian automotive spring and wire products that are imported by US automakers. Nevertheless, both the automotive and construction markets have slowly rebounded since 2009, benefiting from central bank polices that have temporarily enabled industry growth.
From 2014 to 2019, IBISWorld forecasts industry revenue will fall at an annualized rate. Despite downstream demand for industry products increasing as US construction revives and consumer confidence strengthens, industry operators will continue to be challenged by rising import competition, particularly from the United States and China.
For more information, visit IBISWorld’s Wire & Spring Manufacturing in Canada industry report page.
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IBISWorld industry Report Key Topics
The Wire & Spring Manufacturing industry manufactures heavy-gauge and light-gauge springs using steel and drawn wire. Industry operators also manufacture other wire-based products.
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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