Improving economy to pave path for growth of petrochemical manufacturing industry in USA

The Petrochemical Manufacturing industry plays an important role in the US economy. Many of the goods produced by petrochemical manufacturers are the fundamental building blocks used to produce a variety of consumer and industrial products like detergents and pharmaceuticals. While petrochemicals are essential to many kinds of chemical manufacturing, the industry is still susceptible to economic shifts. As per IBISWorld, over the five years to 2012, revenue is expected to decline at an average annual rate of 1.8% to $80.8 billion. However, this decline has not been constant. Although the recession caused this industry to suffer in 2008 and 2009, revenue has been on the rise since 2010. During 2008 and 2009, key buying industries reduced their demand for petrochemicals. As downstream industries such as construction and packaging bought fewer plastics and chemicals, the industry lowered production, reducing petrochemical revenue. The industry also endured changing raw-material costs, which affected price structures. Industry firms had to adjust to shifting production intensity and handle excess capacity. However, in 2012, revenue is anticipated to grow as buying industries increase their manufacturing levels and buy more petrochemicals. Revenue is expected to grow 2.2% over 2012 because of higher demand, higher prices and stabilized capacity. From 2012 to 2017, industry revenue is projected to grow; similar to the previous five years, industry revenue will be volatile. Although demand from key buying industries will remain relatively constant, changing raw-material costs will affect prices and cause revenue to fluctuate. If the industry raises prices too significantly, buyers could reduce their purchases, hurting revenue. Some firms are expected to move abroad to mitigate costs; others will find it difficult to wind down capacity, choosing to sell off establishments too costly to continue operating. While revenue is anticipated to increase over the next five years, the industry will likely consolidate. Some firms will leave the industry because of high costs and others will make acquisitions to meet demand levels. The Petrochemical Manufacturing industry has a low level of concentration, with the top four players accounting for an estimated 10.8% of industry revenue. In addition, over half (55.0%) of establishments employ fewer than 100 workers, although industry concentration has gradually increased. This trend has continued in line with various mergers and acquisitions, with the remaining players seeking to strengthen their position in the increasingly competitive market. According to Amari, industry consolidation among integrated companies such as Exxon Mobil Corporation and Dow Chemical Company has also resulted in the development of larger and stronger petrochemical players. Moreover, the departure of smaller players that cannot adapt to the changing operating environment has further aided this concentration process. Further consolidation is expected as players shut down excess capacity over the five years to 2017.
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