Rebounding demand from downstream sectors surpassed supply, pushing up the price of drill bits
Los Angeles, CA (PRWEB) September 29, 2014
Drilling bits have a buyer power score of 3.0 out of 5, which reflects moderate negotiating power for buyers. “On one hand, low switching costs, negligible price volatility and a moderately fragmented market have favored buyers,” says IBISWorld research analyst Agiimaa Kruchkin. “On the other, buyer power is limited by the low availability of direct substitutes.”
Buyer power is limited by moderate to high volatility of external demand drivers and input prices. Demand for drilling bits is heavily dependent on the industrial production index, average annual rainfall and the world production of oil. Following the recent global economic crisis, activity in downstream gas exploration, mining, oil drilling and water-well drilling projects has rebounded strongly, boosting demand for drilling bits and, hence, fueling price growth. However, according to Kruchkin, rising import penetration has kept market share concentration moderate, encouraging price competition and countering some of the increased demand from downstream markets.
The ongoing economic rebound has also fueled demand for various raw material inputs used in the manufacturing of drilling bits. This trend combined with fluctuations in demand from downstream markets create an unpredictable purchasing environment that weakens buyer power. Although suppliers of drilling bits generate a moderate level of profitability, the volatility of primary inputs, like steel, limits margins. As a result, prices for drilling bits have often been in flux during the three years to 2014 as suppliers try to maintain profitability. Suppliers' need to protect returns severely limits their price flexibility; however, bulk purchases and supply contracts help buyers retain some leverage. Volume discounts can reduce per-unit prices, and supply agreements can shield buyers from future price spikes. Current major vendors include Baker Hughes Inc., Haliburton and Weatherford. 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 placed in a drill and 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, polycrystalline-diamond-compact (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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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.