In the three years to 2017, prices for drilling tools are anticipated to grow, primarily on the back of rebounding steel prices
Los Angeles, CA (PRWEB) October 22, 2014
Drilling tools have a buyer power score of 3.0 out of 5, which indicates moderate buyer power in the market. The low availability of direct substitutes has maintained demand for drilling tools during the past three years, undermining buyer power. Alternatively, the low level of switching costs, moderate market share concentration and the negligible rate of price volatility have facilitated favorable purchasing conditions for buyers in the three years to 2014. The low switching costs are beneficial because once a buyer has met their drilling needs, they are free to source from another supplier. “Similarly, the moderately fragmented market allows for price-based competition, also favoring buyers,” according to IBISWorld business research analyst Agiimaa Kruckin.
The demand for drilling tools is heavily dependent on industrial production, average annual rainfall and government consumption and investment. The recent droughts in the continental United States have strongly boosted demand for water well drilling projects and, hence, drilling tools. As a result, product prices have risen moderately in the past three years, limiting buyer power. However, falling input costs have strongly shaped this market's performance during the past three years, as indicated by moderated price growth. Namely, weakening steel prices have favored buyers; the falling cost of inputs has lifted suppliers' margins, in turn limiting growth in product prices. “Meanwhile, the ongoing economic rebound has been fueling demand for drilling tools and accessories from major downstream markets, including oil drilling and gas exploration, as well as government agencies, thus offsetting the impact of falling costs,” says Kruckin.
Volatile steel prices and fluctuating demand from downstream markets create an unpredictable purchasing environment that weakens buyer power. As a result, prices for drilling tools are often in flux as suppliers try to maintain profitability. Consequently, buyers should consider entering multiyear supply agreements with vendors, thus locking in current prices and hedging against future price volatility. Additionally, because suppliers have limited price flexibility due to volatility in input costs, bulk purchases offer buyers some potential cost savings. Major vendors include Atlas Copco, National Oilwell Varco, Sandvik AB and Schlumberger Company. For more information, visit IBISWorld’s Drilling Tools procurement category market research report page.
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IBISWorld Procurement Report Key Topics
This report is intended to assist buyers of drilling tools. Drilling tools include a variety of components and parts, such as drill collars, coring equipment, drill pipes, blowout preventers, thrusters, drilling jars, hole openers, hole reamers, drilling subs and gauge rings, among other related accessories and equipment. Drilling tools are supplied by machinery manufacturers, tool wholesalers and retail stores. This report excludes directional drilling tools, casing-while-drilling tools, handheld drilling tools and industrial drilling tools.
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
About IBISWorld Inc.
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.