Industry growth will be driven by improving downstream markets
New York, NY (PRWEB) October 13, 2014
Chemicals play a vital role in many downstream industries, and as a result, the Chemical Wholesaling industry has performed steadily since 2009. Industry operators supply a wide range of chemical products, and their downstream markets range from pharmaceutical companies to fertilizer manufacturers. Though industry revenue was negatively impacted by the recession, industry operators have recovered strongly. In the five years to 2014, IBISWorld estimates that industry revenue has somewhat grown.
According to IBISWorld Industry Analyst James Crompton, “During the recession, the industry experienced low demand for its products, as the construction sector reduced chemical purchases when housing starts and commercial construction fell.” The construction sector uses chemicals like adhesives, epoxies and sealants; therefore, its weak performance negatively affected chemical wholesalers' financial performance through the recession. At the same time, consumer spending decreased, and many manufacturing industries reduced production, requiring fewer chemicals. However, as overall economic conditions have improved, industry operators have adapted.
The industry is highly exposed to fluctuations in input prices, as many of the industry's suppliers derive chemicals from crude oil and natural gas. In the five years to 2014, the world price of crude oil has increased significantly. However, much of this growth came in 2010 and 2011, and in recent years crude oil price growth has eased as increasing production has increased the available supply of crude oil. “Even though wholesalers benefit from lower purchasing costs, they face decreasing revenue generation and profitability as they must adjust their selling prices to customers according to prevailing market prices,” says Crompton. As a result, industry revenue is forecast to slightly decrease.
The Chemical Wholesaling industry exhibits a low level of market share concentration. There is only one company, Univar Canada, that accounts for more than 10.0% of industry revenue, and other industry operators are typically small and regional operators that supply local markets. Moreover, the diversified nature of the industry's products ensures it is difficult for an operator to dominate a single product segment. This trend is anticipated to continue over the next five years, though IBISWorld expects some operators could merge operations or acquire competitors to expand their market share. The number of industry operators is forecast to decline over the next five years, and this will likely lead to an increase in the overall market share concentration over the period.
Over the five years to 2019, IBISWorld anticipates that the industry will grow moderately. Growth will be driven by improving downstream markets, especially from oil and gas companies, the construction sector and manufacturing industries. However, rising oil prices will continue to constrain profitability, and the average industry operator will likely see profit margins fall marginally over the period. Furthermore, the industry will continue facing labour competition, and operators are expects to increase their wage payments to compete with external competition.
For more information, visit IBISWorld’s Chemical Wholesaling in Canada industry report page.
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IBISWorld industry Report Key Topics
This industry wholesales chemicals and related products, including compressed gas, chemical additives and synthetic rubber, to the manufacturing, construction and mining industries. This industry does not wholesale agricultural and medicinal chemicals, paints and varnishes, fireworks or plastics materials.
Industry Performance
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Major Companies
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Recognized as the nation’s most trusted independent source of industry and market research, IBISWorld offers a comprehensive database of unique information and analysis on every US and Canadian industry. With an extensive online portfolio, valued for its depth and scope, the company equips clients with the insight necessary to make better business decisions. Headquartered in Los Angeles, IBISWorld 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.