In the next three years, price of propane is projected to fall at a significantly slower rate, primarily on the back of movements in the world price of crude oil
Los Angeles, CA (PRWEB) April 06, 2015
Propane has a buyer power score of 4.2 out of 5. This score reflects relatively strong buyer power stemming from a highly fragmented market, the significant availability of substitutes and the low level of specialization. These factors have contributed to intense price-based competition, which further aids buyer power. The price of propane has plummeted over the past three years, making the product more affordable. In addition, propane suppliers are financially stable, which minimizes risk for buyers. Some of this market’s largest suppliers are AmeriGas Partners, Enterprise Products Partners, Kinder Morgan and CHS Inc.
Although falling prices have made purchasing conditions favorable for buyers, propane prices have fluctuated widely in recent years. For example, prices jumped 23.4% in 2011, and then fell a drastic 37.1% in 2012. Buyer power has shifted accordingly during the past three-year period. The price drop during 2012 was due to unusually warm weather, which slashed demand. This trend has begun to reverse due to extreme cold weather conditions in late 2013 and early 2014, which have led to supply shortages in the Plains, Great Lakes, New England and Mid-Atlantic regions of the country and, consequently, drove up prices. “High price volatility from changing weather conditions has hampered buyer power by making it more difficult for buyers to budget for their propane expenses. Meanwhile, external demand drivers, namely the value of private nonresidential construction, manufacturing capacity utilization and the value of residential construction, have all begun to trend upward, supporting increased demand and, as a result, price increases for propane,” according to IBISWorld business research analyst Agiimaa Kruchkin.
During the three years to 2017, demand for propane is anticipated to rise slightly, primarily due to the expected growth in the use of propylene, a propane byproduct. “Because propane is used in a diverse range of markets, from agriculture to petrochemistry, demand will be robust. Nevertheless, prices are projected to drop slightly on the back of the anticipated fall in the cost of inputs over the next three years, which will aid buyer power,” Kruchkin says. Furthermore, buyers can enter into long-term supply contracts with propane vendors to lock in prices over the length of their agreement. For more information, visit IBISWorld’s Propane procurement category market research report page.
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IBISWorld Procurement Report Key Topics
This report is intended to assist buyers of propane, which is a colorless, odorless, non-toxic type of liquefied petroleum gas (LPG). This report covers three grades of the gas: HD5 propane, HD10 propane and commercial propane. The primary buyers of propane include utilities, fuel, commercial, industrial and agricultural markets. Specifically, propane is used in furnaces, outdoor grills, air conditioners, fireplaces, irrigation pumps, water heaters and appliances, as well as propane-driven forklifts and some fleet vehicles. This report does not cover other gaseous fuels like butane, coal gas and methane.
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.