Rising demand from the mining and gas extraction markets has fueled price growth for drilling fluids
Los Angeles, CA (PRWEB) June 03, 2014
The buyer power score for drilling fluids is 3.4 out of 5, representing moderate buying power that stems from a low cost to switch suppliers and low volatility anticipated in future price growth. Conversely, buying power is limited by high market share concentration and a lack of available substitutes.
In the drilling fluids market there are typically few costs associated with switching from one drilling fluid provider to another. “The primary cost of switching depends on whether or not the buyer had signed a contract with the original supplier,” says IBISWorld research analyst Ian Buchanan. “Contracts usually have a breach-of-contract fee that the party terminating the contract is responsible for paying. These fees are to provide both the buyer and the supplier with guarantees and reduce their risk.” All other costs are typically minimal, such as an increase in shipping costs when selecting a new supplier that is located further away. The low cost to switch providers gives suppliers an incentive to offer flexible pricing or renegotiate contract terms, leading to increased buying power.
The top four vendors control a majority of the market, indicating high market share concentration and a low level of competition. Current major vendors include Halliburton Company, Schlumberger Limited, Baker Hughes Incorporated, National Oilwell Varco and Weatherford International Ltd. Because of the reduced competition, suppliers gain pricing leverage and are less willing to negotiate lower prices with buyers. Furthermore, buying power is harmed by the lack of practical substitutes to drilling fluids. Says Buchanan, "Buyers can purchase separate inputs and create drilling fluids on-site using a drilling engineer, but doing so requires specific knowledge and experience." Knowing that buyers have few alternatives, both in suppliers and products, suppliers gain more pricing leverage and buying power is reduced further. For more information, visit IBISWorld’s Drilling Fluids procurement category market research report page.
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IBISWorld Procurement Report Key Topics
This report is intended to assist buyers of drilling fluids, commonly known as drilling mud. These fluids are used to assist in drilling boreholes by maintaining wellbore stability, suspending drill cuttings and cooling and lubricating the drill bit. Drilling fluids are used when drilling for natural gas and oil, mining and drilling water wells. Drilling fluids can be classified as water-based muds, gaseous drilling fluid and nonaqueous muds. This report excludes drilling services and other equipment involved in the drilling process.
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.