for the organic chemical manufacturing industry has grown at a relatively
strong, but volatile, pace during the past five years. Over the five years to
2017, revenue is set to improve, as downstream demand rises, says a new report
from IBISWorld. Rising production and raw material costs will likely cut into
profit, but overall growth will occur over the next five years due to growth in
the construction sector and a rise in consumer spending.
organic chemical manufacturing industry has expanded over the five years to
2012. The industry provides raw materials for plastics, paint and adhesive
manufacturing, and is expected to increase at an annual average rate of 4.3% to
$125.0 billion in 2012. Although the recession lowered demand from end-use
customers that caused revenue to drop in 2009, the industry has benefited from
increasing demand and consumer spending, with large jumps in revenue occurring
before the recession set in.
economic downturn caused many of the industry''s customers to reduce their
production levels as consumer spending fell and the housing and construction
sectors declined, IBISWorld industry analyst Radia Amari says. Additionally,
changing raw material costs, including oil prices, which rose at an annualized
rate of 8.2% over the five years to 2012, compressed industry margins.
economy began to recover in 2010, with higher manufacturing levels increasing
demand for organic chemicals. In line with these trends, revenue in 2012 will
increase 4.0%, as demand strengthens. However, it will be limited by higher raw
material prices in the form of oil. Higher selling prices that offset feedstock
costs, together with increased demand for exports and a decline in
establishments, will increase industry profit to 6.5% of revenue in 2012.
the five years to 2017, demand from key buying industries will expand, driven
by higher consumer consumption and an increase in exports. "While industry
revenue will increase, rising input costs and potential government regulation
will put downward pressure on profitability," Amari says. Because of rising
material and operating costs, companies will close underperforming plants and
improve production facilities that make the cut. During this period,
manufacturing facility numbers are expected to decrease.
organic chemical manufacturing industry has a low level of concentration, with
the top four players accounting for less than 5.0% of industry revenue in 2012.
According to the U.S. Census Bureau, nearly 47% of industry companies have fewer
than 20 employees, while 76.0% of companies have fewer than 100 employees.
Additionally, low barriers to entry, including moderate technological change,
will support a low market concentration over the next five years. However, the
degree of concentration varies between different product segments. For example,
within the gum and wood chemicals product segment, the top four companies
account for over 80.0% of the market.
industry manufactures basic organic chemicals (other than petrochemicals),
industrial gases and synthetic dyes and pigments. Key product groups include
gum and wood products, cyclic crudes and intermediates, ethyl alcohol and other
basic organic chemicals. These products are predominantly intermediates that
are used as raw material inputs by other manufacturing industries in the
production of downstream products.