In the next three years, prices of drill bits are projected to continue rising, albeit at a slower rate, as price-based competition limits growth in prices.
Los Angeles, CA (PRWEB) February 22, 2015
Drill bits have a buyer power score of 2.9 out of 5, which reflects moderate negotiating power for buyers. On one hand, buyer power is limited by the low availability of direct substitutes; on the other, low switching costs, negligible price volatility and the moderately fragmented nature of the market have favored buyers over the three years to 2014. “Demand for drill bits is heavily dependent on the industrial production index, average annual precipitation and the world production of oil,” says IBISWorld procurement analyst Agiimaa Kruchkin. “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 drill bits and, hence, fueling price growth.” However, rising import penetration has kept market share concentration moderate, encouraging price-based competition and countering some of the increased demand from downstream markets. Currently, the largest players in the market are Baker Hughes, Schlumberger, National Oilwell Varco and Halliburton.
“The ongoing economic rebound has fueled demand for various raw material inputs used in the manufacturing of drill bits,” adds Kruchkin. “Nevertheless, rises in the price of steel, a primary input, has subsided over the past three years, slowing growth in the price of drill bits and providing some relief to buyers.”
The volatility in both external demand drivers and input costs has effectively limited buyer power. Fluctuations in demand from downstream markets and volatile steel prices create an unpredictable purchasing environment. Although suppliers of drill bits generate a moderate level of profitability, volatility in primary inputs threatens margins. As a result, prices for drill 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. Fortunately for buyers, bulk purchases and supply contracts can help them retain some leverage. For instance, volume discounts can reduce per-unit prices, while longer-term supply agreements can shield buyers from future price spikes. For more information, visit IBISWorld’s Drill Bits procurement category market research report page.
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IBISWorld Procurement Report Key Topics
This report is intended to assist buyers of drill bits and related accessories. Drill 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 bits, polycrystalline-diamond compact (PDC) bits, longwall bits, core bits and natural-diamond bits. This report excludes industrial, dental, surgical, endoscopic, tile and hand drill bits, as well as cases and 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
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.