Over the three years to 2013, rebounding demand from mining and industrial production sectors outpaced supply growth and contributed to increases in the price of drilling bits.
Los Angeles, CA (PRWEB) May 20, 2014
Drilling bits have a buyer power score of 3.2 out of 5. This score reflects moderate negotiating power for buyers. Buyer power is limited by the medium to high volatility of external demand drivers and input prices. Demand for drilling bits and accessories is heavily dependent on industrial production, the average annual rainfall and world production of oil. The recent global economic crisis sent the number of gas exploration, mining, oil and water well drilling projects on a precipitous decline, causing demand for drilling bits and related accessories to weaken. Similarly, says IBISWorld procurement analyst Agiimaa Kruchkin, “Government agencies cut their spending on soil sampling and evaluation projects, hampering demand for drilling bits.”
Nevertheless, the ongoing economic rebound has been fueling demand for drilling bits and accessories from major downstream markets, including mining, oil drilling and water well drilling. As a result, the price of the primary input, steel, grew in the three years to 2013. “Rising steel prices caused prices for drilling bits and related products to increase in the three-year period, hampering buyer negotiating power,” says Kruchkin.
Volatile steel prices and fluctuations in demand from downstream markets create an unpredictable purchasing environment that weakens buyer power. Suppliers of drilling bits and accessories have moderate profitability; however, the volatility of primary inputs, like steel, limits margins. As a result, prices for bits are often in flux as suppliers try to maintain profitability. Suppliers' need to protect returns severely limits their price flexibility. However, bulk purchases and supply contracts offer buyers some potential cost savings: Volume discounts can reduce per-unit prices, while supply agreements can shield buyers from future price spikes. Major suppliers in this market include Baker Hughes Incorporated, Schlumberger Limited, Haliburton and National Oilwell Varco.
For more information, visit IBISWorld’s Drilling Bits procurement category market research report page.
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IBISWorld Procurement Report Key Topics
This report is intended to assist buyers of drilling bits and related accessories. Drilling bits are held in a drill and are used to create cylindrical holes for mining, oil drilling, gas exploration and water well drilling purposes. This report covers a variety of drill bits, including nozzle drill bits, PDC bits, longwall bits, core bits and natural diamond drill bits. This report excludes industrial, dental, surgical, endoscopic, tile and hand drill bits, as well as drill bit cases and drill bit sets.
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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