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Plastic & Resin Manufacturing in the USFebruary 2016 1

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Built up: Increasing downstream demand is


expected to support industry demand

IBISWorld Industry Report 32521

Plastic & Resin


Manufacturing in the US
February 2016

David Witter

2 About this Industry

16 International Trade

32 Key Statistics

Industry Definition

18 Business Locations

32 Industry Data

Main Activities

Similar Industries

20 Competitive Landscape

Additional Resources

20 Market Share Concentration

32 Annual Change

20 Key Success Factors

3 Industry at a Glance

32 Key Ratios

33 Jargon & Glossary

20 Cost Structure Benchmarks


22 Basis of Competition

4 Industry Performance

22 Barriers to Entry

Executive Summary

23 Industry Globalization

Key External Drivers

Current Performance

25 Major Companies

Industry Outlook

25 The Dow Chemical Company

10 Industry Life Cycle

28 Operating Conditions
12 Products & Markets

28 Capital Intensity

12 Supply Chains

29 Technology & Systems

12 Products & Services

29 Revenue Volatility

14 Demand Determinants

30 Regulation & Policy

15 Major Markets

30 Industry Assistance

www.ibisworld.com | 1-800-330-3772 | info @ibisworld.com

Plastic & Resin Manufacturing in the USFebruary 2016 2

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About this Industry


Industry Definition

This industry manufactures resins, plastic


materials (i.e. polymers) and synthetic
rubber. This includes thermosetting
resins, thermoplastic resins and synthetic

Main Activities

The primary activities of this industry are

rubber. Raw material inputs are sourced


from chemical industries and industries
involved in the production of petroleumbased feedstock.

Thermoset resin manufacturing


Thermoplastic resin manufacturing
Synthetic rubber manufacturing
Polyethylene resin manufacturing
Polypropylene resin manufacturing
The major products and services in this industry are
Synthetic rubber
Thermoplastics - polyethylene
Thermosetting resins and plastic materials
Other thermoplastics
Other

Similar Industries

32552 Adhesive Manufacturing in the US


Companies in this industry manufacture resin adhesives.
32599 Chemical Product Manufacturing in the US
Enterprises in this industry manufacture custom compounds of resins.
32611 Plastic Film, Sheet & Bag Manufacturing in the US
Companies in this industry manufacture plastics resins and convert resins into plastics products.
32621 Tire Manufacturing in the US
Companies in this industry process natural, synthetic or reclaimed rubber into intermediate or final products.

Additional Resources

For additional information on this industry


plastics.americanchemistry.com
American Chemistry Council
www.ihs.com
IHS Inc.
www.plasticsindustry.org
The Plastics Industry Trade Association

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Plastic & Resin Manufacturing in the US February 2016

Industry at a Glance
Plastic & Resin Manufacturing in 2016

Key Statistics
Snapshot

Revenue

Annual Growth 11-16

Annual Growth 16-21

Profit

Exports

Businesses

$103.5bn 0.1%

2.3%
$34.6bn 1,053

$6.5bn

Demand from manufacturing

Revenue vs. employment growth

% change

The Dow Chemical


Company
10.4%

30

20

20

10

10

% change

Market Share

0
-10

0
-10
-20

-20
-30

Year 08

10

12

Revenue

14

16

18

20

-30

Year

22

09

11

13

15

17

19

21

Employment
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p. 25

Products and services segmentation (2016)

Key External Drivers

2.3%
Other

13.1%

Demand from
manufacturing

Synthetic rubber

36.2%

Value of construction

Other thermoplastics

Trade-weighted index

13.6%

World price of crude oil

Thermosetting resins
and plastic materials

Price of natural gas

p. 4

34.8%

Thermoplastics - polyethylene

Industry Structure

Life Cycle Stage


Revenue Volatility
Capital Intensity

Mature
Medium
High

Industry Assistance

Medium

Concentration Level

Low

FOR ADDITIONAL STATISTICS AND TIME SERIES SEE THE APPENDIX ON PAGE 32

Regulation Level

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SOURCE:
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Heavy

Technology Change

Medium

Barriers to Entry

Medium

Industry Globalization
Competition Level

High
Medium

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Industry Performance

Executive Summary | Key External Drivers | Current Performance


Industry Outlook | Life Cycle Stage
Executive
Summary

Following a volatile period, the Plastic and


Resin Manufacturing industry experienced
solid demand over the five years to 2016.
The industry, which relies on demand from
downstream manufacturers and the
construction sector, rapidly recovered after
the recession, benefiting from increased
construction and manufacturing activity.
Consequently, revenue is expected to rise at
an annualized rate of 0.1% to $103.5 billion
in the five years to 2016, including a 2.2%
rise in 2016.
The prices of raw materials, such as
crude oil, were also volatile over the five

years to 2016. Crude oil prices quickly


recovered from recessionary lows,
reaching record levels in 2012. However,
the price has dropped dramatically since,
including a 47.0% fall over 2015 resulting
from supply increases and depressed
demand. Overall, the world price of crude
oil dropped an estimated annualized
14.4% over the five years to 2016. As
input prices rose, industry operators
adjusted, reducing employment and
adopting lower-cost, automated
processes to restore profitability.
However, as downstream activity

recovered and prices fell, employment


increased to meet higher demand
requirements. Consequently, profit is
expected to be strong in 2016 as industry
players reap the benefits of lower input
prices and automation.
Exports account for a significant
percentage of industry revenue, but
export growth has been hampered by a
strengthening dollar. The trade-weighted
index, measuring the relative strength of
the US dollar to foreign currencies, is
expected to grow an annualized 6.2% in
the five years to 2016. Relatively more
expensive to foreign buyers, US exports
are anticipated to drop an annualized
2.6% over the period. Conversely, foreign
imports will likely become cheaper for
domestic producers, increasing industry
imports an estimated annualized 1.1%
over the five-year period.
Much like the current period,
increasing downstream markets are
expected to support industry demand in
the five years to 2021, although rising
input prices and a strengthening US
dollar will constrain growth to an
annualized 2.3% to $116.2 billion.
Alternatively, the prices of crude oil and
natural gas, two key inputs, are expected
to grow at annualized rates of 7.0% and
5.7%, respectively, in the next five years,
tightening profit margins and
constricting growth as producers attempt
to pass costs along to consumers.

Demand from manufacturing


Industry products are used as inputs for
a wide variety of manufacturing
industries, including automobile,
electronics and packaging
manufacturers. Therefore, higher
demand for finished products created by
the manufacturing sector boosts demand
for synthetic resins and plastic
materials. Demand from manufacturing
is expected to increase in 2016.

Value of construction
Industry products such as PVC pipes,
windows, moldings and flooring are
used as inputs in a wide variety of
materials that are used by the
construction sector, most notably in
home building. Consequently, demand
for synthetic resins and plastic materials
is influenced by the level of construction
activity. The value of construction is
expected to increase in 2016,

As

input prices rose, operators adjusted,


reducing employment and adopting lower-cost
processes to restore profitability

Key External Drivers

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Industry Performance

representing a potential opportunity for


this industry.
Trade-weighted index
The trade-weighted index (TWI)
measures the value of the US dollar
relative to other currencies. When the
TWI shifts, demand for domestic
plastic and synthetic rubber
manufacturing is affected. A weaker US
dollar increases foreign purchases of
US industry products; conversely, an
appreciating dollar reduces demand for
domestic industry products and
renders imports more affordable. The
trade-weighted index is expected to
increase in 2016, representing a
potential threat to the industry.
World price of crude oil
Hydrocarbons, which are derived from
crude oil, are a main ingredient in resin
and synthetic rubber manufacturing.

When the price of crude oil increases,


manufacturing input costs also rise,
hurting profit margins. Some
manufacturers will pass the higher input
costs on to consumers in the form of
higher prices. Higher prices often deter
customers from purchases, thereby
decreasing industry revenue. The world
price of crude oil is expected to decrease
in 2016.
Price of natural gas
Ethylene, which is derived from natural
gas, is a key raw material input for
polyethylene, a type of plastic produced
by this industry. As the price of natural
gas increases, the price of ethylene rises,
driving up material costs for plastic and
resin manufacturers. To cope with rising
costs, operators are likely to pass on cost
increases to consumers, which could
lower demand. The world price of natural
gas is expected to increase in 2016.
Value of construction

Demand from manufacturing


20

1500

10

1300

$ billion

% change

Key External Drivers


continued

-10

900

-20
-30

Year

1100

09

11

13

15

17

19

21

700

Year 06

08

10

12

14

16

18

20

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Industry Performance

Current
Performance

The pervasiveness of plastics and


plastic-based products helped the Plastic
and Resin Manufacturing industry
expand over the past five years. After
sectors, including manufacturers,
construction and other key buying
markets, experienced sizable drops in
demand and quick recoveries as the
economy struggled, the industry

Volatile demand

The manufacturing and construction


sectors account for more than half of
industry revenue. Key manufacturing
industries include automobile making,
in which plastic and resin are inputs for
automotive parts and interior
components, and packaging material
production, which uses industry
products to manufacture plastic bags,
films, sheets and bottles. In the
construction sector, several materials
are produced using plastic and resin
inputs, including piping, wallpaper,
flooring and window applications.
Consumer spending plays a key role
in determining the level of demand for
both markets. After high unemployment
and declining income levels during the
recession drastically reduced demand
for manufactured consumer goods and
new construction, the industry has
rebounded nicely over the past five
years. According to the US Bureau of
Economic Analysis, consumer spending
increased an annualized 2.4% over the

five years to 2016, supporting higher


demand for plastic and resin materials.
As consumers purchased more goods,
manufacturing activity increased. In
addition, the number of newly
constructed homes increased every year
due to growth in consumer spending,
first-time homebuyer credits and other
government housing programs.
As a result of increased consumer
spending, industrial production, which
includes manufacturing, grew at an
annualized rate of 2.4% in the five years
to 2016. Similarly, the number of housing
starts, a key statistic in assessing the
performance of the residential
construction industry, is expected to
grow at an annualized rate of 13.5% over
the five years to 2016.

Plastic resin, the primary component of


plastic, is made from petrochemical and
natural gas feedstocks. Consequently, the
cost of manufacturing plastics rises and
falls in accordance with oil and natural
gas prices. As oil prices climbed from
2011 to 2013, industry players were
forced to raise prices and reduce costs to
maintain profitability. While price

increases and a low-demand


environment are detrimental to this
industrys average profit margin, plastic
and resin manufacturers made necessary
labor cuts to offset rising material
expenses, which helped keep their own
prices relatively competitive.
Recently, however, input prices have
dropped, with the world price of crude

Cost and profit

experienced steady demand. Over the


five years to 2016, industry revenue is
expected to grow at an annualized rate
of 0.1% to $103.5 billion. This has been
driven by steady growth in demand for
industry products by downstream
markets. Revenue is expected to increase
2.2% in 2016, as demand for industry
products continues to grow.

Consumer

spending plays a
key role in determining the
level of demand

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Industry Performance

Cost and profit


continued

oil expected to fall at an annualized


rate of 14.4%, including a staggering
47.0% drop in 2015 alone.
Additionally, the price of natural gas is
expected to decrease at an annualized
rate of 6.8% over the same period,
maintaining its position near
historically low levels. Industry
operators have been forced to lower
prices to reflect these lower costs.
Increased demand for lower-priced
goods has induced industry players to
increase employment. Over the five years

Trade limits growth

Exports have been a source of consistent


demand for plastic and resin
manufacturers, despite volatility in other
downstream markets. Not only did
exports help mitigate some declines in
domestic demand that occurred during
the economic downturn, they also helped
fuel the industrys recovery. In addition,
emerging economies, such as Mexico and
China, demanded more plastic and resin
materials to serve an expanding middle
class. Recently, however, a strengthening
US dollar has decreased the relative
purchasing power of foreign buyers,
while Chinese growth is slowing,
resulting in them purchasing fewer
domestically manufactured goods.
Exports are anticipated to fall an average

to 2016, employment is expected to grow


at an annualized rate of 1.5% to 77,584
workers. Furthermore, technological
advancements enabled workers to
become more productive. As a result, the
average industry profit margin is
expected to rise to an estimated 6.5% in
2016. Increased profit margins spurred
more domestic manufacturers to enter
this industry. The number of industry
enterprises is expected to increase at an
annualized rate of 3.4% to 1,053 over the
five years to 2016.

Exports

have been a source


of consistent demand
for plastic and resin
manufacturers
of 2.6% per year to reach $34.6 billion
over the five years to 2016, accounting for
an estimated 33.5% of industry revenue.
Domestic operators also face
increasing competition foreign
producers. Relatively lower-cost imports
are expected to rise at an annualized rate
of 1.1% to an estimated $16.0 billion over
the five years to 2016, accounting for
18.9% of domestic demand in 2016.

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Industry Performance

The importance of plastic and resin


products in construction and
manufacturing industries is expected
to bolster industry revenue in the five
years to 2021. Stronger industrial
production and construction activity
will underpin sustained revenue
growth for operators. Consequently,
in the five years to 2021, IBISWorld
anticipates industry revenue to rise
at an annualized rate of 2.3% to
$116.2 billion, including growth of
2.7% in 2017.

Revenue vs. exports


30
20

% change

Industry
Outlook

10
0
-10
-20
-30

Year 08
Revenue

10

12

14

16

18

20

22

Exports
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Sustained demand

The industrys two largest buyers of


industry products, downstream
manufacturers and the construction
sector, are set to experience growth in
demand and revenue over the next five
years, following a period of recovery
from the recession over the past five
years. Over the five years to 2021, per
capita disposable income is anticipated
to grow at an average annual rate of
2.4%, while unemployment is expected
to drop over the period. These two
factors will spur more consumer
spending at the retail level, which will
increase demand for manufactured
goods that use plastic and resin as
inputs, thus increasing industry
demand. The industrial production
index, a measurement that includes
manufacturing activity, is set to grow
at an annualized rate of 2.0% in the
five years to 2021. As manufacturing
activity improves, demand for plastic
and resin inputs will rise.
Demand for plastic-based
construction materials is also
anticipated to expand. Housing starts
are expected to increase at an
annualized rate of 5.4% over the five

years to 2021, and growth is expected


to be strongest in 2017 and 2018.
Private nonresidential construction is
also set to increase over the five-year
period. As construction projects
advance, demand for pipes, flooring
and other plastic-based construction
materials will increase, thereby
stimulating demand for plastic and
resin inputs.
Demand from foreign buyers will
also rise, with exports forecast to
increase at an annualized rate of 0.6%
to $35.7 billion over the next five
years, or 30.7% of industry revenue.
Much of this demand is expected to
come from neighboring Mexico and
Canada, which, in addition to their
shared borders with the United States,
also possess favorable US trade
relations via the North American Free
Trade Agreement. As the US dollar
strengthens and foreign-produced
goods become relatively cheaper,
imports are expected to grow at an
annualized rate of 2.3% to $17.9
billion in the five years to 2021,
accounting for a similar percentage of
domestic demand.

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Industry Performance

Profit remains strong

Raw material prices will increase over


the next five years. Specifically, the
price of crude oil is expected to increase
at an annualized rate of 7.0%, while the
price of natural gas is expected to rise
at an annualized rate of 5.7% in the five
years to 2021. With demand from key
downstream buying markets set to
increase, plastic and resin
manufacturers are expected to pass on
most of these additional costs to
customers. However, increased
downstream demand is also expected to
lead to industry operators hiring more
employees as their manufacturing
capacity expands. Wages are expected
to rise an annualized 2.1% to $6.4
billion over the five-year period. As a
result, profit margins are anticipated to
decline, accounting for 5.8% of revenue
in 2021.
Companies will likely invest more
resources in integration and research
and development, particularly in
relation to innovation and efficiency in
the production process. Popular resins,
such as polypropylene and polyethylene,
which together account for more than
half of all industry revenue, are
produced in bulk within large, highly
capital-intensive facilities. To lower
production costs, larger and more
successful companies integrate these
facilities into oil refineries to more easily
source inputs and expand their
distribution capabilities.
Manufacturers will also likely invest
resources into bioplastic technology, an
alternative to fossil fuel-based plastics,
which are derived from biomass sources,
such as vegetable oil and cornstarch. In

Raw

material prices will


increase over the next five
years
addition to being biodegradable, the
production process for bioplastics
generates less greenhouse gas emissions
when compared with petroleum-based
plastics. However, bioplastic is
significantly more expensive to produce
than petroleum-based plastic, averaging
20.0% more in production costs. Still,
plastic and resin manufacturers will
continue to explore ways to use
bioplastics and reduce their production
costs over the next five years.
Several new players are forecast to
enter the industry with the expectation
of piggybacking on industry-wide
revenue growth. Over the five years to
2021, IBISWorld estimates the number
of enterprises will increase at an
annualized rate of 1.5% to 1,133
companies. Furthermore, employment
is expected to grow at an annualized
rate of 1.8% to 84,626 workers over the
five years to 2021. The difference
between enterprise growth and
employment growth highlights the
industrys gradual shift toward
automation in the production process.
The Plastic and Resin Manufacturing
industry is already highly capital
intensive and, while additional labor
will be needed to monitor production
processes and handle customer service
inquires, the majority of new demand
will arise through investments in new
production equipment.

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Industry Performance
Life Cycle Stage

The industry has fairly stable products,


brands and ownership
Product groups and user industries are clearly defined
Revenue and value added have grown
moderately over the past decade

% Growth in share of economy

The industry faces increased merger


and acquisition activity

20

Maturity

Quality Growth

Company
consolidation;
level of economic
importance stable

High growth in economic


importance; weaker companies
close down; developed
technology and markets

15

Key Features of a Mature Industry


Revenue grows at same pace as economy
Company numbers stabilize; M&A stage
Established technology & processes
Total market acceptance of product & brand
Rationalization of low margin products & brands

10

Quantity Growth

Many new companies;


minor growth in economic
importance; substantial
technology change

Laminated Plastics
Manufacturing

Plastic Pipe & Parts Manufacturing


Adhesive Manufacturing

Plastic & Resin Manufacturing

Electric Power Transmission

Chemical Product Manufacturing

Decline

-5

Shrinking economic
importance

-10
-10

-5

10

15

20

% Growth in number of establishments


SOURCE: WWW.IBISWORLD.COM.AU

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Industry Performance

Industry Life Cycle


This

industry
is M
 ature

The Plastic and Resin Manufacturing


industry is in the mature phase of its life
cycle because of its moderate growth rate,
product saturation, market acceptance
and increased merger and acquisition
activity. Industry value added (IVA),
which measures the industrys
contribution to the overall economy, is
expected to increase at an average annual
rate of 2.0% in the 10 years to 2021, which
is above the expected US GDP growth rate
of 2.3% per year over the same period.
Other indications that the industry is
in the mature phase of its life cycle
include clearly defined, segmented
product groups and industry users. In
addition, its key buying sectors,
manufacturing and construction, are
made up of many industries that are
either maturing or declining themselves.
Product development has also been

largely stagnant, with no new


technological innovations boosting the
industry to a new growth stage. For
example, bioplastics, while lucrative
niche products, are not growing
significantly enough to alter the
industrys life cycle.
Merger and acquisition activity has
also been steady, which is yet another
sign of a mature industry. In the five
years to 2016, larger operators acquired
smaller ones to increase market share
and reach higher economies of scale. A
notable merger is Hexion Specialty
Chemicals merger with Momentive
Performance Materials in 2010. In a
prominent acquisition involving the
industrys largest player, Dow Chemical
Company purchased specialty chemical
and materials manufacturer Rohm and
Haas Company in 2009.

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Products & Markets

Supply Chain | Products & Services | Demand Determinants


Major Markets | International Trade | Business Locations

Supply Chain

KEY BUYING INDUSTRIES


32611

Plastic Film, Sheet & Bag Manufacturing in the US


This industry uses various polyethylene products, which are by industry used to produce plastic
bags and sheets.

32612

Plastic Pipe & Parts Manufacturing in the US


This industry demands resins to manufacture plastic pipes.

32613

Laminated Plastics Manufacturing in the US


These operators demand resin and synthetic rubber for their laminate flooring production.

32614

Polystyrene Foam Manufacturing in the US


This industry demands polystyrene resins.

32615

Urethane Foam Manufacturing in the US


This industry demands resins for its production of urethane foam.

32616

Plastic Bottle Manufacturing in the US


Various plastic materials and synthetic resins produced by this industry are used to produce
plastic bottles and containers.

KEY SELLING INDUSTRIES

Products & Services

22112

Electric Power Transmission in the US


Electricity is a significant cost for the Plastic, Resin and Rubber Manufacturing industry.

22121

Natural Gas Distribution in the US


Natural gas is a key energy source used by the industry.

23712

Oil & Gas Pipeline Construction in the US


New construction and plant expansions are important for the industry to satisfy demand.

32411

Petroleum Refining in the US


Plastic, resin and rubber manufacturers use feedstock derived from petroleum.

32511

Petrochemical Manufacturing in the US


Petrochemical inputs represent a significant cost for cost for the industry.

The industrys products can be classified


into five main groups: thermoplastic
polyethylene, other thermoplastics,
thermosetting resins and plastic
materials, synthetic rubber and other
resins and materials.
Thermoplastics - polyethylene
At an estimated 34.8% of total industry
revenue, polyethylene makes up a
significant share of the Plastic & Resin
Manufacturing industry. Its primary use
is for packaging goods such as plastic
bags, plastic films and bottles, and it is
the most common plastic manufactured
by the industry. It is also a popular choice
for pressure pipe systems due to its
inertness, strength and ease of assembly.

Polyethylene is a thermoplastic, or a
group of plastics that can be heated and
re-formed several times. It is classified
into categories based on its density and
branching, as these two factors have a
significant impact on its mechanical
properties and applications. Branching
refers to polymer chains with branch
points that can connect additional chain
segments. In general, the more branching
a polymer has, the less dense and hard it
will be. High-density polyethylene, which
has a low degree of branching, is
commonly used in items like milk jugs,
detergent bottles, garbage containers and
a large number of toys. In contrast,
low-density polyethylene has a high
volume of branching is a popular choice

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Products & Markets

Products & Services


continued

Products and services segmentation (2016)

13.1%

2.3%
Other

Synthetic rubber

36.2%

Other thermoplastics

13.6%

Thermosetting resins
and plastic materials

Total $103.5bn

34.8%

Thermoplastics - polyethylene

for plastic bags and film wrap. While


demand for polyethylene fell slightly
during the recession, it remained mostly
stable over the past five years thanks to
its broad array of applications.
Other thermoplastics
This segment includes polypropylene, a
thermoplastic polymer noted for its
ruggedness and resistance to heat and
chemical solvents. Due to its durability, it is
used in an array of applications, including
carpets, food storage, textiles and
automotive components. Also included in
this segment is polyvinyl chloride (PVC),
which is the third-most widely-produced
plastic, after polyethylene and
polypropylene. PVC is a favorite choice
among the construction industry because it
is less expensive than ductile iron and other
more durable alternatives. In addition, it
can be made softer and more elastic by
adding plasticizers, which increase the
plastics fluidity.
The most common use of PVC is the
production of pipes for household,
municipal and industrial applications.
Naturally, the downturn in residential and
commercial construction that took place
during the recession caused a significant
decline in demand for PVC. However,
demand has recovered as the construction

SOURCE: WWW.IBISWORLD.COM

sector, especially residential, has grown.


In the five years to 2016, the number of
housing starts expected to grow at an
annualized rate of 13.5%. Collectively,
other thermoplastics are expected to
account for 36.2% of industry revenue in
2016, an increase from 2011.
Thermosetting resins and
plastic materials
This segment is expected to account for
an estimated 13.6% of industry revenue
in 2016. Whereas thermoplastics can be
reheated and reformed, thermosetting
materials are permanent. The most
common thermosetting plastic is phenol
resins, which were the first commercial
synthetic resin and are mainly used to
manufacture circuit boards and other
electronics. Phenol resins are also a
popular choice for pool balls, laboratory
countertops and a myriad of coatings,
adhesives and laminates. Other
thermosetting resins are commonly used
in construction materials and consumer
goods like electronics. Therefore, as the
construction market tumbled and
consumers reduced their spending during
the recession, demand for thermosetting
resins declined. Since 2011, however,
demand for these products has increased
as these threats have been reversed.

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Products & Markets

Products & Services


continued

Synthetic rubber
Unlike natural rubber, which comes from
trees, synthetic rubber is man-made and
derived from petroleum and other
minerals. Synthetic rubbers are classified
according to whether they are vulcanized
or non-vulcanized. Vulcanization is a
process by which sulfur and other
chemicals are added to rubber in a curing
process, typically involving a
combination of high pressure and heat.
The result is a mechanically-superior
product that is stronger and more
durable. Products made from vulcanized
rubber include tires, shoe soles and
hockey pucks. Un-vulcanized rubber is

characterized by its stickiness and


propensity to deform when subjected to
warm or cold temperatures. Unvulcanized rubber is generally sold as a
raw material input for vulcanized rubber.
As with the other product segments,
synthetic rubber chemical demand has
been volatile. When the US automotive
industry ground to a halt during the
recession, this segments demand fell
sharply. However, it began to rebound as
American automotive manufacturers
emerged from bankruptcy and consumers
spending increased. As a share of
industry revenue, synthetic rubber is
estimated to account for 13.1% in 2016.

Demand
Determinants

Manufacturing is the central driver of


demand in the Plastic and Resin
Manufacturing industry, as a myriad of
manufacturing industries incorporate
plastic inputs into their products.
Industrial production in the United
States, which includes manufacturing,
fell sharply during the recession.
However, beginning in 2010, industrial
production has been on the rise, and is
expected to grow 1.5% in 2016, thanks in
part to a revitalized US auto industry. As
manufacturing continues to gain steam,
demand for plastic inputs will increase.
In addition, a large portion of plastic
chemicals are used in packaging products
from downstream manufacturers. Demand
for packaging materials is linked to
consumer spending, which declined for the
first time in over two decades during the
recession, but has grown since 2010, and is
set to grow steadily during 2016. Consumers
have purchased more manufactured goods
and consequently, demand for plastic
packaging has increased.

insulation and windows. A major driver of


overall construction is residential
development, which often spurs
subsequent construction projects such as
roads, bridges, schools and commercial
development. In the five years to 2016, the
value of residential construction has
increased at an average annual rate of
8.4%, including an estimated 8.6% increase
in 2016. This increase in construction has
increased demand for plastic inputs used in
these building projects.

Construction
A range of plastic inputs are used in
construction parts, like pipes that use
plastic materials, valves, fittings, flooring,

Demand for substitute goods


Industry demand is affected by the price
and availability of substitute goods. The
main substitute good for plastic is rubber.
Plastic products, such as toys and foodstorage containers, often compete
directly with rubber counterparts.
Another substitute for plastic is glass,
which is used as an alternative material
in dishware. In addition, unstable crude
oil prices are serving as a catalyst toward
finding new plastic alternatives. As the
price of crude oil increases, as is expected
over the five years to 2021, the price of
plastic, and subsequently the interest in
finding nonoil-based replacements, also
rises. The growing shift in consumer

Plastic & Resin Manufacturing in the USFebruary 2016 15

WWW.IBISWORLD.COM

Products & Markets

Demand
Determinants
continued

preference toward more


environmentally-friendly products
further contributes to the trend of
developing nonoil-based plastics. One
example that has emerged from this
trend is Arboform, a wood pulp-based,
nontoxic alternative plastic that is being
touted as a replacement material for
products such as speaker boxes, golf tees
and automotive parts.
Trade-weighted Index
A weak US dollar makes domestic
producers more competitive with

Major Markets

foreign manufacturers because it gives


foreign countries more purchasing
power in the United States. The dollar,
however, has been strengthening, and
the trade weighted index is expected to
grow an annualized 6.2% in the five
years to 2016, making US exports
relatively more expensive. Emerging
economies, such as China and India,
have been hubs of manufacturing
growth, and the more cost-competitive
domestic producers can be, the higher
the potential demand for the industrys
products in foreign markets.

Major market segmentation (2016)

13.0%
Other

33.9%

Manufacturing

19.6%

Construction

Total $103.5bn

33.5%
Exports

Major market segments for the Plastic &


Resin Manufacturing industry fluctuate
with the performance of downstream
plastic and resin product buyers. These
include a host of manufacturing
industries and construction buyers.
Manufacturing
Players in the industry operate throughout a
broad spectrum of manufacturing and
packaging industries that use plastic to seal
and transport produced goods, including
automobile, electronic, home furnishing and
plastic bottling production. Collectively,
these downstream manufacturers make up

SOURCE: WWW.IBISWORLD.COM

and estimated 33.9% of total industry


revenue. Demand from this segment has
been volatile over the past five years. Also in
this period, industrial production in the
United States, which includes
manufacturing, grew at an annualized rate
of 2.4%. One of the strongest rebounding
industries during the past five years was
automobile manufacturing, a key buyer for
plastic and resin producers. Other
manufacturing industries that demand
plastic and resin products include furniture,
machinery and electronic industries. As a
percentage of revenue, manufacturing has
increased in the five years to 2016.

Plastic & Resin Manufacturing in the USFebruary 2016 16

WWW.IBISWORLD.COM

Products & Markets

Exports
Exports make up the second largest
market for US plastic and resin
manufacturers at 33.5% of total industry
revenue in 2016, down from 38.3% in
2011. The total value of industry exports
has decline at 2.6% per year, on average.
The dollar has strengthened over the
period, making domestically produced
goods more expensive and constraining
growth, a trend expected to continue.
However, higher resin demand from
emerging economies, such as Mexico, has
supported export demand. Mexico has
increased its manufacturing output;
therefore, it is in need of more plastics
and resins for its produced goods. In the
five years to 2021, exports are forecast to
increase at an annualized rate of 0.6%.
Construction
The construction market accounts for an
estimated 19.6% of industry revenue.
This industry primarily purchases
thermoplastic resins used in flooring and
window covering applications. When the
subprime mortgage crisis hit, plastic and

International Trade
Level & Trend
 xports in the
E

industry are H
 igh
and D
 ecreasing
Imports

in the
industry are
Mediumand S
 teady

While exports have contracted and


imports have increased over the past five
years, the sheer volume of exports is
significantly larger than that of imports.
Over this period, the disparity between
exports and imports has resulted in a
trade surplus of $18.6 billion in 2016.
Exports
Exports in the industry are expected to
fall at an average annual rate of 2.6% to
$34.6 billion in the five years to 2016.
Despite growing plastic and resin
demand from emerging economies,
volatile feedstock prices and a
strengthening US dollar have
constrained exports. The most common
export destinations for US plastic and
resin manufacturers in 2016 are Mexico

resin manufacturers experienced a sharp


decline in demand from construction
material manufacturers that sustained
into 2011 and finally turned the corner in
2012. During the five years to 2016, the
value of construction is expected to grow
at an annualized rate of 7.6% including
6.8% growth in 2016. In the five years to
2021 the value of construction is
anticipated to increase at an annualized
rate of 4.1%, which will likely bolster this
segments share of overall revenue. The
construction segment has increased as a
share of revenue in the five years to 2016.
Other
This segment accounts for an estimated
13.0% of total industry revenue and
encompasses a host of industries,
including chemical processing, agriculture
and wholesale buyers. Products include
ethanolamine, ethyleneamines,
isopropanolamines, chelants and other
chemical compounds that are commonly
found in pesticides, detergents and
cleaners. The size of this segment has
increased in the five years to 2016.

Industry trade balance


40
30
20

$ billion

Major Markets
continued

10
0
-10
-20

Year 08
Exports

10

12

Imports

14

16

18

20

22

Balance
SOURCE: WWW.IBISWORLD.COM

and Canada, which represent 23.2% and


17.0% of total industry exports,
respectively. These countries benefit

Plastic & Resin Manufacturing in the USFebruary 2016 17

WWW.IBISWORLD.COM

Products & Markets

International Trade
continued

from their shared borders with the


United States, as well as from favorable
trade conditions via the North American
Free Trade Agreement (NAFTA).
Rounding out the remainder of the top
exporting destinations are China (10.1%)
and Belgium (5.7%).
Imports
In the five years to 2016, the total value
of imports in the industry has risen at
an average annual rate of 1.1% to $16.0
billion. As a share of domestic demand,

Exports To...

imports fell from 19.3% in 2011 to an


estimated 18.9% in 2016. The largest
source of imports is Canada, expected
to account for about 34.8% of industry
imports in 2016, which benefits from its
close proximity to the United States
and from trade-friendly provisions
within NAFTA. Germany is the secondlargest importer and is expected to
account for 10.0% of industry imports
in 2016. Rounding out the remainder of
the top importing countries are Japan
(8.3%) and Mexico (7.8%).
Imports From...

5.7%

Belgium

10.1%

7.8%

China

44.0%

8.3%

Mexico

Japan

All Others

39.1%
All others

10.0%

17.0%

Germany

Canada

34.8%
Canada

23.2%
Mexico

Year: 2016

Total $34.6bn

SIZE OF CHARTS DOES NOT REPRESENT ACTUAL DATA

Total $16.0bn
SOURCE: USITC

Plastic & Resin Manufacturing in the USFebruary 2016 18

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Products & Markets


Business Locations 2016

West
New
England

AK
0.0

Great
Lakes
WA

ND

MT

0.8

Rocky
Mountains
ID

OR
1.3

West NV
0.5

1.9

SD
0.1

WY

0.4

MN

0.0

0.2

Plains

CO

0.8

KY

0.7

OK
0.8

NC
4.4

TN

AZ

NM

1.1

0.1

Southwest
TX
9.5

HI
0.1

Additional States (as marked on map)


1 VT

2 NH

3 MA

4 RI

5 CT

6 NJ

7 DE

8 MD

0.1
1.7

0.9

3.2

3.4

0.5

SC

Southeast

0.6

MS

AL
1.8

1.9

GA
4.0

1.2

LA
2.1

FL
2.8

Establishments (%)

1.1

0.6

AR

0.5

1.7

10.1

WV VA
1.0

2.5

1.4

CA

West

7.6

MO

KS

0.8

OH

3.4

5.7

4.5

IN

IL

0.3

UT

PA

5.3

0.8

0.2

1 2
3
NY
2.8
5 4

MI

3.1

IA

NE

0.0

WI

ME

MidAtlantic

9 DC
0.1

Less than 3%
3% to less than 10%
10% to less than 20%
20% or more

SOURCE: WWW.IBISWORLD.COM

Plastic & Resin Manufacturing in the USFebruary 2016 19

WWW.IBISWORLD.COM

Products & Markets

Distribution of establishments vs. population


30

20

10

Southwest

Southeast

Plains

New England

Rocky Mountains

Establishments

Mid-Atlantic

Great Lakes

0
West

In 2016, The Plastic and Resin


Manufacturing industry is estimated to
be composed of 1,311 establishments. The
industry is reliant on demand from
downstream manufacturers; therefore,
business locations are concentrated in
regional manufacturing hubs. The Great
Lakes and Southeast regions of the
United States account for nearly half of
all establishment locations at 25.0% and
24.4%, respectively. Additionally, these
two regions, especially the Southeast, are
home to a number of oil refineries. Their
close proximity to ports helps as well,
with the Southeast region being fairly
close to Mexico and the Great Lakes
region having easy access to Canada.
The Mid-Atlantic and Western regions
of the United States hold the next largest
numbers of establishments; collectively,
these regions account for more than a
quarter of industry plants. In addition to
being near ports and refineries, these
regions benefit from having large
representative states. For example,
Pennsylvania, which is in the Mid-

Business Locations

Population
SOURCE: WWW.IBISWORLD.COM

Atlantic region of the United States,


accounts for 4.5% of industry
establishments alone. Similarly,
California, which is the Western region of
the United States, accounts for 10.1% of
industry establishments.

WWW.IBISWORLD.COM

Plastic & Resin Manufacturing in the US February 2016

20

Competitive Landscape

Market Share Concentration | Key Success Factors | Cost Structure Benchmarks


Basis of Competition | Barriers to Entry | Industry Globalization
Market Share
Concentration
Level
Concentration

in
this industry is L ow

Key Success Factors


IBISWorld

identifies
250 Key Success
Factors for a
business. The most
important for this
industry are:

The Plastic and Resin Manufacturing


industry has a low level of concentration,
reflecting the fragmented nature of the
industry. There are an estimated 1,311
establishments operating in the industry,
producing a variety of products. Thus,
despite the existence of prominent global

chemical groups, only one company has a


market share greater than 10.0%. Another
indicator of the low level of concentration
is the fact that more than 40.0% of all
industry operators employ fewer than 20
workers. IBISWorld anticipates these
trends to persist in the next five years.

Guaranteed supply of key inputs


Access to a consistent supply of
competitively priced raw material inputs,
including feedstock, is essential to
remaining competitive.

and are more likely to outperform


manufacturers that are not integrated.

Optimum capacity utilization


In an industry where supply and
demand imbalances can create
considerable volatility, the ability
to use existing capacity to its
optimum efficiency is essential.
Upstream vertical integration
(ownership links)
Plastic and resin manufacturers that
control feedstock, raw materials,
distribution and other operations
can control costs more effectively

Cost Structure
Benchmarks

The Plastic and Resin Manufacturing


industry is heavily influenced by raw
material costs, demand and pricing levels.
Raw material pricing is particularly
important, given the lag between raw
material price changes and the ability of
plastic and resin manufacturers to
implement product price changes.
Furthermore, companies that locate near
the distribution centers of key inputs,
most notably natural gas and crude oil,
can reduce transportation costs.
Profit rebounds
Profit will vary between individual
operators depending on the size of their
operations and on their ability to establish

Concentration on core business


For optimum efficiency and
competitiveness, operators should divest
of low-profit or smaller plants and instead
concentrate on their core product(s).
Economies of scale
The need for low-cost, world-scale
manufacturing facilities operating on a
large scale is essential in this intensely
competitive industry.
Provision of superior after-sales service
With little difference between products,
operators should differentiate themselves
by providing better-quality service.

efficiencies in raw material purchases and


operations. However, IBISWorld
estimates profit, as measured by earnings
before income and taxes, will amount to
6.3% of total industry revenue in 2016.
This increase in industry profitability, up
from 4.9% in 2011, is primarily due to
strong recovery from downstream markets
and the sharp drop in crude oil prices in
2014. However, rising input prices are
expected to constrain profit growth in the
five years to 2021. The price of natural gas
is expected to rise at an annualized rate of
5.7% in the five years to 2021.
Consequently, IBISWorld expects
profitability to decrease slightly over the
same period.

WWW.IBISWORLD.COM

Plastic & Resin Manufacturing in the US February 2016

21

Competitive Landscape

Raw material costs on the rise


Accounting for an estimated 66.0% of
industry revenue in 2016, raw material
costs are the largest expense for plastic
and resin manufacturers. Key raw
materials include propylene, ethylene,
phenol, acetone, chlorine, benzene and
naphtha. The majority of these materials
are made from petroleum or natural gas.
In recent years, the cost of many of these
raw materials has fluctuated significantly,
reflecting the volatile nature of crude oil
and natural gas prices. In the five years to
2016, the prices of crude oil and natural
gas have experienced significant declines
and increases. In addition to being
volatile, raw material costs tend to be
cyclical, so industry participants with the
ability to use a wide range of raw
materials typically benefit from lower
variable costs.
Fuel costs associated with transportation
are also included in the purchase segments.

Smaller industry manufacturers are usually


not integrated with a refinery or
petrochemical complex; therefore, they
need to transport raw materials and other
feedstock for their production.
Labor and capital expenses
Wages are the second-largest cost to the
industry and account for an estimated
5.6% of total industry revenue in 2016. In
the five years to 2016, the total number of
employees in the industry has increased
at an average annual rate of 1.5%.
Depreciation expenses decreased slightly
overall, from 2.3% of industry revenue in
2011 to 2.0% in 2016, however, since
falling to a low 1.7% in 2012, this share
has been on the rise. Depreciable assets
include buildings, storage equipment and
machinery used in the manufacturing
process. The small and increasing share
of depreciation relative to revenue is
illustrative of this industrys aging

Sector vs. Industry Costs


Average Costs of
all Industries in
sector (2016)
100

Industry Costs
(2016)

7.1
11.0

6.3
5.6

56.0

66.0

n Profit
n Wages
n Purchases
n Depreciation
n Marketing
n Rent & Utilities
n Other

80

Percentage of revenue

Cost Structure
Benchmarks
continued

60

40

20

2.4
2.6
20.0

0.9

2.0
3.6

0.1

16.4

0
SOURCE: WWW.IBISWORLD.COM

WWW.IBISWORLD.COM

Plastic & Resin Manufacturing in the US February 2016

22

Competitive Landscape

Cost Structure
Benchmarks
continued

equipment stock. Industry players have


been increasingly investing in
automation, contributing to
depreciations rising share.
Other expenses
Rent and utilities are estimated to
account for 3.6% of industry revenue in

Basis of Competition
Level & Trend
 ompetition
C

in
this industry is
Mediumand the
trend is I ncreasing

Barriers to Entry
Level & Trend
 arriers to Entry
B

in this industry are


Mediumand S
 teady

2016. Marketing and advertising costs


are expected to amount to 0.1% of
industry revenue. Other costs, which
include freight and insurance premiums,
research and development investments
and licensing and legal fees, are
estimated to account for 16.4% of
industry revenue in 2016.

Internal competition
Price is the key basis for competition in
the Plastic and Resin Manufacturing
industry. However, given the fact that
plastic materials, resin and synthetic
rubber are global commodities, prices are
largely determined by those of global
chemicals like ethylene, which is a key
input for polyethylene and other
thermoplastics. Price is also dependent
upon other variables like the prices of
raw materials such as crude oil and
natural gas, as well as the degree or
integration and scale of production. A
larger plastic and resin manufacturer
may own its own supplier and
distributor; therefore, the firm can
reduce costs and price its products more
competitively than other operators.
Product performance attributes, such
as strength-to-weight ratios, waterproof
ability, malleability, safety, installation
costs and the ability to be recycled are
also major factors for competition.
Research and development (R&D) is the

basis for improving product performance


and establishing a higher degree of
differentiation between competitors;
therefore, plastic and resin
manufacturers devote significant
financial resources to R&D.

Barriers to entry are substantial, though


not insurmountable. The highly capitalintensive nature of the industry is
particularly important. Hundreds of
millions of dollars are required to
construct a complex with the capability to
produce high-performance products,
processes and applications. In addition,
many of the plants tend to be highly
integrated complexes, requiring special

technical equipment, machinery and


expertise. Economies of scale and the
ability to produce at a high capacity are
necessary to operate efficiently and
achieve low unit costs.
The industrys maturity combined with
its limited size poses another significant
barrier. It is often difficult to enter a
mature industry dominated by a number
of established manufacturers who have

External competition
The industry often competes against
manufacturers of similar products
composed of substitute materials, such as
rubber, wood and tile. Plastic and resin
manufacturers generally compete with
rubber and other substitute material
manufacturers on price, product
performance, technological innovation,
quality and service. Much like the
relationship between competing domestic
plastic and resin manufacturers, the
advantage over foreign competition often
stems from a companys cost structure,
which is primarily affected by raw material
prices. In 2016, imports are expected to
meet 18.9% of domestic demand, and this
level has risen over the past five years.

WWW.IBISWORLD.COM

Plastic & Resin Manufacturing in the US February 2016

23

Competitive Landscape

Level & Trend


 lobalization
G

in
this industry is
Highand the trend
is I ncreasing

International trade is a
major determinant of
an industrys level of
globalization.
Exports offer growth
opportunities for firms.
However there are legal,
economic and political risks
associated with dealing in
foreign countries.
Import competition can
bring a greater risk for
companies as foreign
producers satisfy domestic
demand that local firms
would otherwise supply.

The Plastic and Resin Manufacturing


industry has a high level of global
exposure, which is evident by the
accelerated growth of imports. In the five
years to 2016, imports are expected to
increase at an annualized rate of 1.1% to
$16.0 billion. This is primarily due to a
strengthening US dollar over the past five
years, making foreign goods relatively
cheaper than their domestic
counterparts. Countries such as Mexico
Trade Globalization
200

Medium
Low
Mature
High
Medium
Heavy
Medium
SOURCE: WWW.IBISWORLD.COM

for product innovation, which expands


the uses of plastic products, increasing
their demand. To effectively compete, an
entrant should be committed to spending
a significant amount of capital on
research and development.

and Canada account for the majority of


industry trade due to their close
proximity and limited trade barriers from
agreements like the North American Free
Trade Agreement. In 2016, imports are
expected to account for 18.9% of
domestic demand, down slightly from
19.3% in 2011. Exports are anticipated to
decline as domestically produced goods
cost relatively more due to the
strengthening US dollar. In the five years

Global

150
100

0 Local
0

Competition
Concentration
Life Cycle Stage
Capital Intensity
Technology Change
Regulation & Policy
Industry Assistance

Going Global: Plastic & Resin Manufacturing


2003-2016

Export

50

Barriers to Entry checklist

Plastic & Resin


Manufacturing

Import

40

160

80

120

Imports/Domestic Demand

200 Export

Exports/Revenue

Industry
Globalization

developed close, integrated relationships


with their customers. These existing
players are also often integrated into raw
material supplies and distribution, which
further strengthens their position.
Though no industry player generates over
10.0% of industry revenue, IBISWorld
expects that the other operators are
typically well funded companies that can
afford to invest heavily in both capital
equipment and research and
development activities.
Moreover, a significant financial
investment is required to acquire,
maintain and update plants and
equipment. This cost may deter some
operators from entering the industry.
Research and development is necessary

Exports/Revenue

Barriers to Entry
continued

Global

150
100
50

2003

0 Local
0

2016
Import
40

80

120

160

Imports/Domestic Demand
SOURCE: WWW.IBISWORLD.COM

WWW.IBISWORLD.COM

Plastic & Resin Manufacturing in the US February 2016

24

Competitive Landscape

Industry
Globalization
continued

to 2016, exports are expected to fall an


annualized 2.6% to $34.6 billion.
Plastic and resin manufacturers are
also increasing their footprints abroad
through foreign partnerships. For
example, industry player Dow Chemical
maintains ownership interests in several
foreign affiliates, including a 28.0%
interest in MEGA S.A., an Argentine

company that provides natural gas and


other feedstock to Dows petrochemical
plant in Argentina. Other Dow ownership
interests include a 42.5% stake in The
Kuwait Olefins Company K.S.C., a
Kuwait-based manufacturer of ethylene
and a 50.0% ownership in MEGlobal, a
Dubai-based manufacturer of
polyethylene and other resins.

Plastic & Resin Manufacturing in the USFebruary 2016 25

WWW.IBISWORLD.COM

Major Companies
The Dow Chemical Company | Other Companies

Major players
(Market share)

89.6%
Other

The Dow Chemical Company 10.4%

Player Performance
The Dow Chemical
Company
Market share: 10.4%
Industry Brand Names
Dow Chemical

SOURCE: WWW.IBISWORLD.COM

As one of the largest chemical companies in


the United States, The Dow Chemical
Company (Dow) produces more than
5,000 products in 197 manufacturing
facilities in 36 countries. Dow, based in
Midland, MI, employs about 52,000 people
globally. The company provides chemicals,
plastic materials and other products to
customers in sectors that include
electronics, water, energy, coatings and
agriculture. Key product segments include
electronic and specialty materials, coatings
and infrastructure, health and agricultural
sciences, performance systems,
performance products, basic plastics, basic
chemicals and hydrocarbons and energy.
In 2015, Dow earned $48.8 billion in total
company revenue.
In 2007, Dow announced a 50/50
joint venture with Chevron Phillips
Chemical Company to combine the
companies respective styrene

businesses in the Americas. The deal


was designed to give Dow access to
inexpensive natural gas. The companys
current strategy of focusing on specialty
chemical production to reduce its
demand for ethylene has also been
essential to the industry. To this end,
Dow closed three ethylene-related plants
in Louisiana in the mid-2000s. The
companys joint venture with Chevron
Philips is one of the primary reasons it
continues to experience above-average
profit margins. This strategy is becoming
increasingly popular in the industry, as
natural gas is a key input for the
companys operations.
Dow also acquired Rohm and Haas
Company as a wholly owned subsidiary
in 2009. Rohm and Haas focuses on
manufacturing specialty chemicals,
electronic materials and salts. The
companys primary concentration is on

The Dow Chemical Company (US industry-specific operations) - Financial


performance*
Year

Revenue
($ million)

(% change)

Operating Income
($ million)

2011

12,306.9

N/C

738.8

N/C

2012

11,330.4

-7.9

332.2

-55.0

2013

11,536.7

1.8

1,375.2

314.0

2014

12,875.1

11.6

1,165.4

-15.3

2015

11,093.0

-13.8

1,642.6

40.9

2016

10,361.2

-6.6

1,384.6

-15.7

*Estimates

(% change)

SOURCE: ANNUAL REPORT AND IBISWORLD

Plastic & Resin Manufacturing in the USFebruary 2016 26

WWW.IBISWORLD.COM

Major Companies

Player Performance
continued

coatings for paints and various


consumer goods.
In 2011, Thomson Reuters added
Dow to its list of the top 100 most
innovative companies in the world,
citing the companys $1.65 billion
investment in research and
development (R&D) that year. Along
with its R&D spending, Dow divested
itself of several nonstrategic plastics
businesses, including its styrene and
polypropylene production arms. In
2011, Dow announced the merger of all
of its plastic businesses into one
segment called performance plastics.
This new division specifically focuses
on innovative and high-growth
products for large sectors, such as
packaging, lassoers, hygiene and
medical and electrical communications.
In late 2015, Dow announced plans for
a merger and spin-off with DuPont.
This merger, pending regulatory
approval that could take upwards of
two years, would create one of the
worlds largest chemical companies.

Financial performance
The company operates in the industry via
its performance plastics, coating and
infrastructure solutions and performance
materials segments. Over the five years to
2016, IBISWorld estimates that Dows
industry-specific revenue will decrease at
an annualized rate of 3.4% to $10.4 billion.
Improving downstream demand bolstered
company revenue and profitability at times
over the past five years. However, in 2015,
IBISWorld estimated a decrease in
revenue of 13.8%, as input prices fell
significantly, lowering the sales prices of
industry goods. Conversely, lower prices
are expected to bolster the companys
profitability as sales prices fall at a rate
slower than natural gas and crude oil
prices. During 2012, Dow implemented
two restructuring plans designed to
advance the company and address
macroeconomic concerns. As a result,
$357.0 million in restructuring charges
were booked, constraining company profit.
These new, leaner operations have
translated to improved margins.

Other Companies

While the Dow Chemical Company


makes up a sizeable share of the Plastic
and Resin Manufacturing industry, the
remaining companies are mostly smallto medium-sized manufacturers. Still,
some large global corporations are also
involved in the industry. However,
IBISWorld anticipates many of these
larger companies operate their plastic
and resin manufacturing facilities outside
of the United States.

company operates in more than 20


countries and markets its products in
more than 150 countries. Key products
include aromatics, additives for fuels and
lubricants, fluids, oriented polypropylene
and packaging film.
ExxonMobil Chemical is expected to
be the largest North American producer
of linear low-density polyethylene
(LLDPE) and the second-largest
producer of high-density polyethylene
(HDPE) and polypropylene. It is also
expected to be one of the worlds leading
producers of ethylene propylene
monomer (EPM) rubber, copolymers and
EDPM terpolymers. To obtain the most
economic feedstock, its major
petrochemical plants are integrated with
its oil refineries. IBISWorld estimates
$3.1 billion will be generated from the

ExxonMobil Chemical Company

Estimated market share: 3.1%


A subsidiary of ExxonMobil, ExxonMobil
Chemical Company is an integrated
manufacturer of olefins (ethylene and
propylene), aromatics (benzene and
toluene), polyolefins (polypropylene and
polyethylene) and synthetic rubber. The

Plastic & Resin Manufacturing in the USFebruary 2016 27

WWW.IBISWORLD.COM

Major Companies

Other Companies
continued

companys US resin and synthetic rubber


manufacturing segment in 2016,
representing a 3.1% market share.

Hexion Inc.

Estimated market share: 1.2%


Formerly Momentive Specialty
Chemicals, Hexion Inc. is a large
producer of binder, adhesive, coating
and ink resins for industrial
applications. The company is considered
the global leader in the production of
epoxy resins. Hexion is divided into four
operating segments and its epoxy and
phenolic resins division operates within
the Plastic and Resin Manufacturing
industry. The other three business
segments include formaldehyde and
forest product resins, coatings and inks
and performance products. Its global
scale and breadth of products enable the
company to deliver significant
advantages to its customers. Key
customers include 3M, Ashland
Chemical, BASF, Bayer and DuPont.

In October 2010, Momentive


Performance Materials and Hexion
Specialty Chemicals merged into 117
production facilities with more than
10,000 employees. The company initially
operated as Momentive Specialty
Chemicals; however, management
decided to change the name to Hexion,
effective January 2015. Prior to the
merger, Momentive specialized in
silicones and advance materials. Before
joining up with Momentive, Hexion
undertook a number of additional
acquisitions, including the global ink and
adhesive resins business of Akzo Nobel
in November 2005, the decorative
coatings and adhesives business unit of
the Rhodia Group in January 2006 and
the global wax compounds business of
Rohm and Hass in March 2006.
IBISWorld estimates that the company
will generate $1.2 billion from its epoxy
and phenolic resins division in the Unite
States in 2016, representing a 1.2%
market share.

Plastic & Resin Manufacturing in the USFebruary 2016 28

WWW.IBISWORLD.COM

Operating Conditions

Capital Intensity | Technology & Systems | Revenue Volatility


Regulation & Policy | Industry Assistance
Capital Intensity
Level
The level

of capital
intensity is H
 igh

The Plastic and Resin Manufacturing


industry requires a substantial amount of
capital investment. The cost of a new
manufacturing plant complete with
machinery and equipment is significant,
and constant product innovation
necessitates regular investment in new
technology. Due to the wide range of the
products offered by this industry,
manufacturing equipment can range in
price from a few thousand dollars to many
millions of dollars. Typical processes plastic
may undergo during the manufacturing
process include extrusion, molding,
thermoforming, coating and recycling.
In addition to the equipment itself,
tooling is generally required to make a
particular shape. Most tooling processes
involve melting or softening the resin and

Capital intensity

Capital units per labor unit


0.5
0.4
0.3
0.2
0.1
0.0

Economy

Manufacturing Plastic & Resin


Manufacturing

Dotted line shows a high level of capital intensity


SOURCE: WWW.IBISWORLD.COM

then forcing it into the desired shape.


Other processes force a monomer or
pre-polymer mixture into a specific shape,

Tools of the Trade: Growth Strategies for Success


Investment Economy

Recreation, Personal Services,


Health and Education. Firms
benefit from personal wealth so
stable macroeconomic conditions
are imperative. Brand awareness
and niche labor skills are key to
product differentiation.

Information, Communications,
Mining, Finance and Real
Estate. To increase revenue
firms need superior debt
management, a stable
macroeconomic environment
and a sound investment plan.

Adhesive Manufacturing

Traditional Service Economy


Wholesale and Retail. Reliant
on labor rather than capital to
sell goods. Functions cannot
be outsourced therefore firms
must use new technology
or improve staff training to
increase revenue growth.

Capital Intensive

Labor Intensive

New Age Economy

Plastic Pipe & Parts Manufacturing


Laminated Plastics Manufacturing

Plastic & Resin


Manufacturing

Chemical Product
Manufacturing

Old Economy
Agriculture and Manufacturing.

Electric Power Traded goods can be produced


Transmission using cheap labor abroad.

To expand firms must merge


or acquire others to exploit
economies of scale, or specialize
in niche, high-value products.

Change in Share of the Economy

SOURCE: WWW.IBISWORLD.COM

Plastic & Resin Manufacturing in the USFebruary 2016 29

WWW.IBISWORLD.COM

Operating Conditions

Capital Intensity
continued

and then polymerize it in place. The more


processes required in the manufacturing
process, the higher the investment and
replacement costs for industry equipment.
IBISWorld estimates that for every
dollar spent on wages, plastic and resin

Technology & Systems The Plastic and Resin Manufacturing


Level
The level

of
Technology Change
is M
 edium

Revenue Volatility
Level
The level

of
Volatility is M
 edium

manufacturers spend an estimated


$0.36 on machinery and equipment. In
the five years to 2016, this level has
fluctuated from a high in 2011 of $0.42,
to a low of $0.32 in 2012 as operators
automate processes at different times.

industry exhibits a moderate level of


technological change. High volume
resins, such as polypropylene and
polyethylene, which together account for
more than half of all plastics
manufactured in the industry, are
manufactured in large-scale, highly
capital-intensive facilities that are often
integrated with oil refineries, and which
generally operate on a continuous basis.
Most technological development is aimed
toward increasing the efficiency of the
production process within these
complexes and increasing the
manufacturing assets of the operators.

In addition, some manufacturing


plants have been exploring the use of
bioplastic, a form of plastic that is
derived from vegetable oil, cornstarch
and other biomass sources. However,
bioplastic is significantly more expensive
to produce than petroleum-based
plastic, and production costs can
average upwards of 20.0% or more than
their traditional counterparts. The high
costs associated with bioplastic have
slowed associated research and
development investments, as many
plastic and resin manufacturers opt to
focus their attention on more affordable,
petroleum-based products.

Demand for this industrys products is


sensitive to demand primarily from
downstream manufacturing industries
and construction, which were hit hard by
the recession, and which both tend to
exhibit medium to high volatility. Plastic
and resin prices tend to exhibit volatility,
since they are heavily influenced by the
price of raw materials like crude oil and
natural gas, which both exhibit high
levels of price volatility. Therefore, in the
five years to 2016, IBISWorld expects
that industry revenue volatility, or the
average absolute change in revenue, for
the industry has been high, at an
estimated 5.8%.

The wide range of end-uses for the


industrys products helps mitigate the
reliance on any single area of demand,
but the Great Recession proved that
the industry is still sensitive to
economic downturns, especially
companies that manufacture only one
product or sell to only one industry.
Over the past five years, industry
revenue fluctuated significantly, rising
by 6.9% in 2011 and falling 0.3% in
2013. The high revenue fluctuations
demonstrate the industrys reliance on
demand from downstream
manufacturers and construction, which
both exhibit significant volatility.

Plastic & Resin Manufacturing in the USFebruary 2016 30

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Operating Conditions

A higher level of revenue


volatility implies greater
industry risk. Volatility can
negatively affect long-term
strategic decisions, such as
the time frame for capital
investment.
When a firm makes poor
investment decisions it
may face underutilized
capacity if demand
suddenly falls, or capacity
constraints if it rises
quickly.

Volatility vs Growth
1000

Revenue volatility* (%)

Revenue Volatility
continued

Hazardous

Rollercoaster

100
10

Plastic & Resin


Manufacturing

1
0.1

Stagnant
30

10

Blue Chip
10

30

50

70

Five year annualized revenue growth (%)


* Axis is in logarithmic scale
SOURCE: WWW.IBISWORLD.COM

Regulation & Policy


Level & Trend
 he level of
T

Regulation is H
 eavy
and the trend
is I ncreasing

Industry Assistance

Like all manufacturers, industry


operators are required to comply with
federal, state and local air emission
legislation. Most plastic composite
manufacturing operations generate
hazardous air pollutants (HAPs) during
the application and curing of thermoset
resins. In particular, the manufacturing
of composite products with polyester
and vinylester resins and gel coats can
release significant amounts of styrene,
which is a HAP. State and federal
agencies regulate these emissions, and
most manufacturing facilities are
required to obtain a registration or
permit. Although plastic manufacturing
equipment and the production process is
designed to comply with these
standards, the regulations have
nonetheless increased the price of the

equipment and the cost of production.


The higher costs associated with these
environmental regulations are one of the
reasons that companies are now looking
to partner with or manufacture in
countries with fewer environmental
regulations, such as China.
Recycling legislation requiring that a
certain percentage of recycled plastic be
included in a specified number of new
plastic containers has been enacted in
several states. Since the price of recycled
resin is currently lower than the price of
virgin resin, it is unclear how these
regulations will affect the cost of
production. Depending on the plastic
product being produced, these
regulations could pose a problem for
manufacturers due to the higher level of
impurities present in recycled plastic.

Tariffs have a long-standing


significance in the Plastic and Resin
Manufacturing industry. They exist to
protect domestic manufacturers and
the domestic industry from foreignproduced goods. This is especially
salient with the growing volume of

inexpensive, imported plastic goods


from Mexico, China and other
emerging economies. Tariffs in this
industry also exist to some extent as a
punitive reaction to the tariffs
American exporters are charged by
other countries.

Plastic & Resin Manufacturing in the USFebruary 2016 31

WWW.IBISWORLD.COM

Operating Conditions

Industry Assistance
continued
Level & Trend
 he level of Industry
T

Assistance is
Mediumand the
trend is I ncreasing

Imports of plastic products made


from polyvinyl chloride, polypropylene
and polyethylene are currently subject to
a 3.1% tariff if they derive from countries
that have normal trade relations (NTR)
with the United States, while imports of
these products from non-NTR countries
are subject to a 25.0% tariff. In addition,
imports of polyethylene terephthalate
products, such as plastic jars, are
currently subject to a 7.1% tariff if they
derive from NTR countries, with a tariff
of 43.0% if they come from non-NTR
countries. Imports of both high-density
polyethylene and low-density
polyethylene products, such as plastic
buckets and watering cans, are also
subject to a 6.8% tariff if they derive

from NTR countries, with a 45.0% tariff


if they derive from non-NTR countries.
The Plastic and Resin Manufacturing
industry also benefits from trade
associations, such as the Society of the
Plastics Industry (SPI), which was
established in 1937 and is the largest
trade association that represents plastic
product manufacturers in the United
States. SPI represents 1,300 members
across the entire plastics industry supply
chain, including processors, machinery
and equipment manufacturers and raw
material suppliers. Assistance provided
by SPI includes the provision of
workplace development programs,
compliance assistance, tradeshows,
industry information and statistics.

WWW.IBISWORLD.COM

Plastic & Resin Manufacturing in the US February 2016

32

Key Statistics
Industry Data
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
Sector Rank
Economy Rank

Industry
Revenue Value Added
($m)
($m)
106,590.5
12,110.6
103,087.0
9,809.0
75,610.7
9,405.5
96,309.1
12,267.3
102,956.7
12,630.1
106,705.3
13,730.3
106,395.5
13,408.2
107,511.3
14,321.4
101,224.7
13,984.2
103,479.1
14,512.6
106,256.2
14,513.8
109,328.6
14,766.0
111,856.7
14,943.8
114,131.1
15,175.1
116,153.2
15,436.3
10/193
13/193
107/1370
202/1370

Annual Change
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
Sector Rank
Economy Rank

Industry
Revenue Value Added
(%)
(%)
-3.3
-19.0
-26.7
-4.1
27.4
30.4
6.9
3.0
3.6
8.7
-0.3
-2.3
1.0
6.8
-5.8
-2.4
2.2
3.8
2.7
0.0
2.9
1.7
2.3
1.2
2.0
1.5
1.8
1.7
104/193
125/193
1024/1370 1117/1370

Key Ratios
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
Sector Rank
Economy Rank

IVA/Revenue
(%)
11.36
9.52
12.44
12.74
12.27
12.87
12.60
13.32
13.82
14.02
13.66
13.51
13.36
13.30
13.29
180/193
1247/1370

Imports/
Demand
(%)
15.74
17.61
16.55
17.54
19.29
18.18
18.17
19.35
18.63
18.88
18.64
18.43
18.43
18.13
18.23
109/180
237/432

Establishments
949
1,217
1,176
1,156
1,171
1,310
1,283
1,312
1,287
1,311
1,326
1,355
1,371
1,400
1,410
61/193
809/1370

Establishments
(%)
28.2
-3.4
-1.7
1.3
11.9
-2.1
2.3
-1.9
1.9
1.1
2.2
1.2
2.1
0.7
42/193
652/1370

Enterprises Employment
675
69,654
907
82,516
893
72,858
882
70,608
892
71,958
1,014
77,668
1,029
78,166
1,052
79,218
1,034
76,082
1,053
77,584
1,066
78,904
1,089
80,833
1,100
82,062
1,125
83,661
1,133
84,626
64/193
41/193
780/1370
440/1370

Enterprises Employment
(%)
(%)
34.4
18.5
-1.5
-11.7
-1.2
-3.1
1.1
1.9
13.7
7.9
1.5
0.6
2.2
1.3
-1.7
-4.0
1.8
2.0
1.2
1.7
2.2
2.4
1.0
1.5
2.3
1.9
0.7
1.2
35/193
68/193
580/1370
828/1370

Exports/
Revenue
(%)
31.35
34.26
36.59
37.07
38.31
35.15
34.77
34.19
33.10
33.47
32.61
32.08
31.52
31.12
30.71
37/180
83/432

Figures are in inflation-adjusted 2016 dollars. Rank refers to 2016 data.

Revenue per
Employee
($000)
1,530.29
1,249.30
1,037.78
1,364.00
1,430.79
1,373.86
1,361.15
1,357.16
1,330.47
1,333.77
1,346.65
1,352.52
1,363.08
1,364.21
1,372.55
12/193
69/1370

Exports
($m)
33,411.2
35,317.8
27,662.7
35,704.3
39,437.7
37,504.0
36,996.0
36,762.8
33,500.7
34,632.7
34,645.1
35,069.2
35,253.7
35,515.2
35,671.2
7/180
8/432

Exports
(%)
5.7
-21.7
29.1
10.5
-4.9
-1.4
-0.6
-8.9
3.4
0.0
1.2
0.5
0.7
0.4
23/180
93/432

Wages/Revenue
(%)
5.06
5.62
6.84
5.54
5.47
5.57
5.50
5.52
5.58
5.58
5.55
5.54
5.52
5.53
5.51
174/193
1264/1370

Imports
($m)
13,669.2
14,485.5
9,507.8
12,892.6
15,180.0
15,379.0
15,410.6
16,979.3
15,506.4
16,023.1
16,408.1
16,776.6
17,308.3
17,408.1
17,939.0
40/180
46/432

Imports
(%)
6.0
-34.4
35.6
17.7
1.3
0.2
10.2
-8.7
3.3
2.4
2.2
3.2
0.6
3.0
78/180
221/432

Employees
per Est.
73.40
67.80
61.95
61.08
61.45
59.29
60.92
60.38
59.12
59.18
59.51
59.66
59.86
59.76
60.02
70/193
200/1370

Wages
($m)
5,395.4
5,788.6
5,171.3
5,333.0
5,629.0
5,940.9
5,854.1
5,935.5
5,643.5
5,770.2
5,895.2
6,061.7
6,177.4
6,311.4
6,403.2
33/193
295/1370

Wages
(%)
7.3
-10.7
3.1
5.6
5.5
-1.5
1.4
-4.9
2.2
2.2
2.8
1.9
2.2
1.5
79/193
886/1370

World Price
Domestic of Crude Oil
Demand ($ per barrel)
86,848.5
71.1
82,254.7
97.0
57,455.8
61.8
73,497.4
79.6
78,699.0
104.0
84,580.3
105.0
84,810.1
104.1
87,727.8
96.2
83,230.4
51.0
84,869.5
47.7
88,019.2
54.8
91,036.0
59.6
93,911.3
63.7
96,024.0
66.0
98,421.0
70.2
15/180
N/A
20/432
N/A

Domestic World Price


Demand of Crude Oil
(%)
(%)
-5.3
36.4
-30.1
-36.3
27.9
28.9
7.1
30.6
7.5
1.0
0.3
-0.9
3.4
-7.5
-5.1
-47.0
2.0
-6.5
3.7
14.9
3.4
8.9
3.2
6.8
2.2
3.6
2.5
6.4
158/180
N/A
386/432
N/A

Average Wage
($)
77,460.02
70,151.24
70,977.79
75,529.69
78,226.19
76,490.96
74,893.18
74,926.15
74,176.55
74,373.58
74,713.58
74,990.41
75,277.23
75,440.17
75,664.69
27/193
254/1370

Share of the
Economy
(%)
0.08
0.07
0.07
0.08
0.08
0.09
0.09
0.09
0.09
0.09
0.08
0.08
0.08
0.08
0.08
13/193
202/1370

SOURCE: WWW.IBISWORLD.COM

Plastic & Resin Manufacturing in the USFebruary 2016 33

WWW.IBISWORLD.COM

Jargon & Glossary

Industry Jargon

POLYETHYLENEAny partially crystalline, lightweight


thermoplastic that is resistant to chemicals and
moisture, has good insulating properties and is used
primarily in packaging and insulation.
POLYMERA chemical compound or mixture of
compounds that consists essentially of repeating
structural units.
POLYPROPYLENEAny of the various thermoplastics or
fibers that are polymers of propylene.

IBISWorld Glossary

BARRIERS TO ENTRYHigh barriers to entry mean that


new companies struggle to enter an industry, while low
barriers mean it is easy for new companies to enter an
industry.
CAPITAL INTENSITY Compares the amount of money
spent on capital (plant, machinery and equipment) with
that spent on labor. IBISWorld uses the ratio of
depreciation to wages as a proxy for capital intensity.
High capital intensity is more than $0.333 of capital to
$1 of labor; medium is $0.125 to $0.333 of capital to $1
of labor; low is less than $0.125 of capital for every $1 of
labor.
CONSTANT PRICESThe dollar figures in the Key
Statistics table, including forecasts, are adjusted for
inflation using the current year (i.e. year published) as
the base year. This removes the impact of changes in
the purchasing power of the dollar, leaving only the
real growth or decline in industry metrics. The inflation
adjustments in IBISWorlds reports are made using the
US Bureau of Economic Analysis implicit GDP price
deflator.
DOMESTIC DEMANDSpending on industry goods and
services within the United States, regardless of their
country of origin. It is derived by adding imports to
industry revenue, and then subtracting exports.
EMPLOYMENTThe number of permanent, part-time,
temporary and seasonal employees, working proprietors,
partners, managers and executives within the industry.
ENTERPRISE A division that is separately managed
and keeps management accounts. Each enterprise
consists of one or more establishments that are under
common ownership or control.
ESTABLISHMENTThe smallest type of accounting unit
within an enterprise, an establishment is a single
physical location where business is conducted or where
services or industrial operations are performed. Multiple
establishments under common control make up an
enterprise.
EXPORTSTotal value of industry goods and services sold
by US companies to customers abroad.
IMPORTS Total value of industry goods and services
brought in from foreign countries to be sold in the
United States.

RESINSA large class of synthetic products that have


some of the physical properties of natural resins, but are
different chemically, and are used chiefly in plastics.
THERMOPLASTICA synthetic resin that is capable of
softening or fusing when heated and then hardening
again when cooled.
THERMOSETA product that is relatively incapable of
softening or fusing when heated.

INDUSTRY CONCENTRATIONAn indicator of the


dominance of the top four players in an industry.
Concentration is considered high if the top players
account for more than 70% of industry revenue.
Medium is 40% to 70% of industry revenue. Low is less
than 40%.
INDUSTRY REVENUEThe total sales of industry goods
and services (exclusive of excise and sales tax); subsidies
on production; all other operating income from outside
the firm (such as commission income, repair and service
income, and rent, leasing and hiring income); and
capital work done by rental or lease. Receipts from
interest royalties, dividends and the sale of fixed
tangible assets are excluded.
INDUSTRY VALUE ADDED (IVA)The market value of
goods and services produced by the industry minus the
cost of goods and services used in production. IVA is
also described as the industrys contribution to GDP, or
profit plus wages and depreciation.
INTERNATIONAL TRADEThe level of international
trade is determined by ratios of exports to revenue and
imports to domestic demand. For exports/revenue: low is
less than 5%, medium is 5% to 20%, and high is more
than 20%. Imports/domestic demand: low is less than
5%, medium is 5% to 35%, and high is more than
35%.
LIFE CYCLEAll industries go through periods of growth,
maturity and decline. IBISWorld determines an
industrys life cycle by considering its growth rate
(measured by IVA) compared with GDP; the growth rate
of the number of establishments; the amount of change
the industrys products are undergoing; the rate of
technological change; and the level of customer
acceptance of industry products and services.
NONEMPLOYING ESTABLISHMENT Businesses with
no paid employment or payroll, also known as
nonemployers. These are mostly set up by self-employed
individuals.
PROFITIBISWorld uses earnings before interest and tax
(EBIT) as an indicator of a companys profitability. It is
calculated as revenue minus expenses, excluding
interest and tax.

Plastic & Resin Manufacturing in the USFebruary 2016 34

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Jargon & Glossary

IBISWorld Glossary
continued

VOLATILITYThe level of volatility is determined by


averaging the absolute change in revenue in each of the
past five years. Volatility levels: very high is more than
20%; high volatility is 10% to 20%; moderate
volatility is 3% to 10%; and low volatility is less than
3%.

WAGESThe gross total wages and salaries of all


employees in the industry. The cost of benefits is also
included in this figure.

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