Plywood prices have been growing due to a rebound in construction activity; rising lumber prices have also contributed to price increases
Los Angeles, CA (PRWEB) January 01, 2015
Plywood has a buyer power score of 2.6 out of 5, which indicates somewhat unfavorable negotiating conditions for buyers. Buyer negotiation power has been declining the three years to 2014. “Plywood price movements are dependent on residential and nonresidential construction expenditure levels. Although prices fell during the recession due to sharp spending reductions from these sectors, they have shown subsequent strong growth as rising construction activity in the economy fueled demand for plywood,” according to IBISWorld business research analyst Jesse Chiang.
In addition, the economic recovery has led to greater demand for lumber, which is the major input in plywood production. This trend has generated large increases in input costs for suppliers, further stimulating price growth to the detriment of buyers both in the three years to 2014 and the three years to 2017. The rising input costs have also led to limited pricing flexibility for suppliers because the average vendor already operates with a low profit margin. As a result, minimal opportunities for major price discounts or cost savings have negatively affected buyer negotiating power.
High volatility in input costs and downstream industry expenditures have also negatively impacted buyer power. The economic recovery has led to significant spikes in construction activity. As a result, plywood prices have been volatile, which makes inventory planning more difficult for buyers and harms their negotiating power. Buyers are forced to engage in contracts to reduce the risk of drastically escalating costs.
Nonetheless, buyers gain some power because of significant market competition and the commoditization of market products. “The wide availability of suppliers in a market with low specialization has forced operators to engage in significant competition, which has compelled suppliers to temper price growth to attract buyers,” Chiang says. In addition, the commoditized nature of plywood allows buyers to select from a wide array of suppliers capable of satisfying specific buyer requirements. As such, buyers can choose a supplier based on numerous other factors such as level of service. For instance, some of the largest suppliers in the market (including Weyerhaeuser Company, Georgia-Pacific Corporation and Louisiana-Pacific Corporation) have extensive vertically integrated operations and wide national and global influence. For more information, visit IBISWorld’s Plywood procurement category market research report page.
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IBISWorld Procurement Report Key Topics
This report is intended to assist buyers of plywood, which is a building product made from pressed layers of wood sheets laid with opposing grains. Plywood is commonly used in construction because of its strength and stability. It is typically purchased through lumberyards and wholesalers, but it can also be procured through retail outlets.
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.