Summarize the analysis on manufacturing Petro chemicals in US-1600

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Summarize the analysis on manufacturing Petro chemicals in US from IBIS world(Report attached).Please go through the report and summarize each section in that report

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Petrochemical Manufacturing in the USJanuary 2017   1 WWW.IBISWORLD.COM Organic compound: As input price volatility eases, industry revenue will grow more consistently This report was provided to Concordia University St. Paul (2126004051) by IBISWorld on 18 April 2017 in accordance with their license agreement with IBISWorld IBISWorld Industry Report 32511 Petrochemical Manufacturing in the US January 2017 Darshan Kalyani 2 About this Industry 15 International Trade 31 Regulation & Policy 2 Industry Definition 17 Business Locations 32 Industry Assistance 2 Main Activities 2 Similar Industries 19 Competitive Landscape 33 Key Statistics 2 Additional Resources 19 Market Share Concentration 33 Industry Data 19 Key Success Factors 33 Annual Change 3 Industry at a Glance 19 Cost Structure Benchmarks 33 Key Ratios 21 Basis of Competition 34 Industry Financial Ratios 4 Industry Performance 22 Barriers to Entry 4 Executive Summary 23 Industry Globalization 4 Key External Drivers 6 Current Performance 24 Major Companies 8 Industry Outlook 24 LyondellBasell Industries 10 Industry Life Cycle 35 Jargon & Glossary 25 Chevron Phillips Chemical Company LLC 26 Ineos Group 12 Products & Markets 12 Supply Chains 29 Operating Conditions 12 Products & Services 29 Capital Intensity 14 Demand Determinants 30 Technology & Systems 14 Major Markets 30 Revenue Volatility www.ibisworld.com | 1-800-330-3772 | info @ibisworld.com Petrochemical Manufacturing in the USJanuary 2017   2 WWW.IBISWORLD.COM About this Industry Industry Definition This industry manufactures petrochemicals, which are chemicals derived from refined petroleum or liquid hydrocarbons. Key products include ethylene, propylene, butylene, benzene, toluene, styrene, xylene, ethyl benzene and cumene. These products Main Activities The primary activities of this industry are are used in the production of consumer products, automotive components and various durable and non-durable goods. Organic compounds like ethyl alcohol and inorganic chemicals like carbon black are excluded from the industry. Manufacturing olefins made from refined petroleum or liquid hydrocarbons Manufacturing polyolefins made from refined petroleum or liquid hydrocarbons Manufacturing ethylene made from refined petroleum or liquid hydrocarbons. The major products and services in this industry are Liquefied refinery gases (aliphatics) Aromatics (benzene, toluene, xylene, etc.) All other Similar Industries 32411 Petroleum Refining in the US This industry manufactures petrochemicals by refining crude petroleum. 32512 Oxygen & Hydrogen Gas Manufacturing in the US This industry manufactures acetylene. 32513 Dye & Pigment Manufacturing in the US This industry manufactures inorganic dyes and pigments. 32519 Organic Chemical Manufacturing in the US This industry manufactures basic organic chemicals (except petrochemicals). Additional Resources For additional information on this industry www.americanchemistry.com American Chemistry Council www.afpm.org American Fuel & Petrochemical Manufacturers www.api.org American Petroleum Institute cen.acs.org Chemical & Engineering News www.epa.gov Environmental Protection Agency Provided to: Concordia University St. Paul (2126004051) | 18 April 2017 WWW.IBISWORLD.COM Petrochemical Manufacturing in the US January 2017   3 Industry at a Glance Petrochemical Manufacturing in 2017 Key Statistics Snapshot Revenue Annual Growth 12-17 Annual Growth 17-22 Profit Exports Businesses $54.1bn -9.5% $8.2bn $2.1bn Demand from plastic and resin manufacturing Revenue vs. employment growth Market Share 30 40 20 Chevron Phillips Chemical Company LLC 12.7% 20 % change 60 % change LyondellBasell Industries  30.6% 0 -20 Ineos Group  6.5% -40 Year 09 3.1% 36 10 0 -10 -20 11 13 15 Revenue 17 19 21 -30 Year 23 09 11 13 15 17 19 21 Employment SOURCE: WWW.IBISWORLD.COM p. 24 Products and services segmentation (2017) 0.4% Key External Drivers All Other Demand from plastic and resin manufacturing 38.4% Price of natural gas Aromatics (benzene, toluene, xylene, etc.) World price of crude oil Trade-weighted index 61.2% Liquefied refinery gases (aliphatics) p. 4 SOURCE: WWW.IBISWORLD.COM SOURCE: WWW.IBISWORLD.COM Industry Structure Life Cycle Stage Mature Regulation Level Heavy Revenue Volatility High Technology Change Low Capital Intensity High Barriers to Entry High Industry Assistance Low Industry Globalization Low Concentration Level Medium Competition Level FOR ADDITIONAL STATISTICS AND TIME SERIES SEE THE APPENDIX ON PAGE 33 Provided to: Concordia University St. Paul (2126004051) | 18 April 2017 Medium Petrochemical Manufacturing in the USJanuary 2017   4 WWW.IBISWORLD.COM Industry Performance Executive Summary | Key External Drivers | Current Performance Industry Outlook | Life Cycle Stage Executive Summary The Petrochemical Manufacturing industry produces goods that make up the fundamental building blocks of a wide range of consumer and industrial products, including detergents and pharmaceuticals. Because petrochemicals are essential to the production of many products, demand for industry products is relatively stable. Nevertheless, the past five years have been volatile, as industry revenue has been sensitive to changes in prices of its key inputs, crude oil and Industry revenue is expected to recover as commodity prices eventually rise natural gas. With oil and gas prices collapsing in 2014, vertically integrated major players were forced to pass on reduced prices down the supply chain. As a result, industry revenue fell at an estimated annualized rate of 9.5%, over the five years to 2017. However, revenue is expected to increase in 2017 on account of slight stabilization of input prices at 12.5%, to total $54.1 billion. The United States has been undergoing an energy revolution because fracking and horizontal drilling technology are Key External Drivers Demand from plastic and resin manufacturing Demand from downstream user industries in the manufacturing sector, particularly the Plastic and Resin Manufacturing industry (IBISWorld report 32521), a key user of ethylene and propylene, increases sales of petrochemicals. Demand from the Plastic and Resin Manufacturing industry is expected to remain flat in 2017 representing a potential opportunity for the industry. making raw hydrocarbons more accessible than ever before. Consequently, the price of natural gas has become more affordable in the United States compared with the rest of the world. Since petrochemical manufacturers require feedstock derived from natural gas, lower natural gas costs have made petrochemical manufacturing more profitable in the United States. As a result, existing players and new entrants have started to expand their US operations. Over the five years to 2017, IBISWorld expects the number of establishments to decrease at an annualized rate of 1.1% to 52 locations. Over the five years to 2022, industry revenue is projected to grow at an annualized rate of 3.1% to $62.9 billion. Industry revenue is expected to recover as commodity prices eventually rise. Vertically integrated companies will be able to take advantage of their economies of scale and further expand production. Furthermore, downstream buying markets are expected to generate substantial demand over the next five years. Profit margins will remain elevated as input prices remain low; however, they will slowly trend toward historic levels. Price of natural gas Since raw materials are a main component of the industry’s cost structure, the price of raw hydrocarbon materials, such as natural gas, can affect the industry’s performance. As the price of natural gas falls, so do industry costs. As a result, some operators lower prices to attract customers. The price of natural gas is expected to rise in 2017. World price of crude oil The world price of crude oil can have a key bearing on the industry’s Provided to: Concordia University St. Paul (2126004051) | 18 April 2017 Petrochemical Manufacturing in the USJanuary 2017   5 WWW.IBISWORLD.COM Industry Performance performance. Since late 2014, the world oil price has plummeted. Lower oil prices cause some companies to lower petrochemical prices, which decreases industry revenue. Oil price volatility will also negatively affect the ability of operators to plan future projects. This uncertainty can negatively impact the industry. The world price of crude oil is expected to rise in 2017, representing a potential threat to the operators in the industry. Trade-weighted index The trade-weighted index measures the strength of the US dollar relative to the currencies of its primary trading partners. When the dollar strengthens, US products become more expensive for trading partners, which hurts international demand. Additionally, a stronger dollar makes international products more affordable, encouraging domestic consumers to purchase imports. The trade-weighted index is expected to increase in 2017. Price of natural gas Demand from plastic and resin manufacturing 10 $ per thousand cubic feet 30 20 % change Key External Drivers continued 10 0 -10 -20 -30 Year 09 11 13 15 17 19 21 8 6 4 2 Year 08 10 12 14 16 18 20 22 SOURCE: WWW.IBISWORLD.COM Provided to: Concordia University St. Paul (2126004051) | 18 April 2017 Petrochemical Manufacturing in the USJanuary 2017   6 WWW.IBISWORLD.COM Industry Performance Production boom Over the five years to 2017, the Petrochemical Manufacturing industry has experienced significant revenue reduction as a result of price fluctuations in crude oil and natural gas, the industry’s two key inputs. In the second half of 2014, the world price of crude oil collapsed. It further fell 47.2% in 2015, while natural gas prices fell 34.4% in the same year, as world supply glut for commodities emerged. Several key operators in this industry are large, vertically integrated, multinational energy companies, who control the supply chain from the point of exploration and drilling, right through to chemical manufacturing, refining and sales to market. Accordingly, the fall in input prices forced operators to pass on the majority of cost savings, although internally, writing down sales prices and slashing industry revenue. Therefore, industry revenue fell in double digits in 2015 and continued through 2016. Consequently, industry revenue is expected to fall at an annualized rate of 9.5% over the five years to 2017 to reach $54.1 billion. However, with input prices showing signs of stabilization and underlying demand picking up, the industry is expected to experience a 12.5% revenue increase in 2017. Falling revenue has resulted in a slight reduction in enterprises; the number of industry operators are expected to decrease at an annualized rate of 0.5% to 36 companies during the five-year period. Despite the recent fall in sales prices, output volumes have expanded significantly as a result of increasing domestic production of oil and natural gas. The Petrochemical Manufacturing industry uses feedstock derived from either oil or natural gas to produce petrochemicals, so purchases of these inputs represent the largest costs for industry operators. Due to fracking and horizontal drilling technology, there has been a boom in US production of oil and natural gas in recent years. Access to nearby and more affordable raw materials gave domestic manufacturers a comparative advantage over foreign competitors. The natural gas boom has caused companies to reshore the manufacturing of petrochemicals and expand domestic operations. In an effort to reduce transportation costs, industry participants tend to locate operations in proximity to raw materials. For example, industry player CPChem expanded an existing facility in Baytown, TX to take advantage of raw materials in the area. This facility is conveniently located next to the Eagle Ford shale. Advancements in production technology have provided an abundance of affordable feedstock for industry participants, pushing down prices of popular feedstock like ethane. According to the Boston Consulting Group, the price of natural gas in the United States is between 2.6 and 3.8 times lower than competing countries. US petrochemical manufacturing facilities primarily use ethane for feedstock, which is derived from wet natural gas, while, European and Asian manufacturing Revenue vs. exports 60 40 % change Current Performance 20 0 -20 -40 Year 09 11 Revenue 13 15 17 19 21 23 Exports SOURCE: WWW.IBISWORLD.COM Provided to: Concordia University St. Paul (2126004051) | 18 April 2017 Petrochemical Manufacturing in the USJanuary 2017   7 WWW.IBISWORLD.COM Industry Performance Production boom continued facilities use naphtha, which is derived from crude oil. During the past five years, the price of natural gas fell ahead of crude Commodity prices crash Due to the collapse in commodity prices in late 2014, record prices for oil and gas drove up the overall world prices of oil and gas. For example, surging demand from emerging economies, such as China, drove the world price of crude oil to an average of $105.00 per barrel in 2012. Nevertheless, increasing levels of world production eventually led to an oversupply and, coupled with a slowdown in demand from China, world commodity prices collapsed in 2014. Fluctuations in the price of oil and gas strongly impact industry revenue. Petrochemical manufacturers are vertically integrated and pass on a significant portion of price changes down the supply chain as they seek to maximize profit across the whole petrochemical production process. As a result of falling input prices, major players were forced to write down sales prices, significantly reducing industry revenue in 2015 and 2016. Nevertheless, underlying demand volume remains strong. Since the Petrochemical Manufacturing industry makes intermediate products or raw materials for other manufacturers, any shifts in the downstream production of chemical or plastic products affect demand for petrochemicals. Over the past five years, demand for homes and consumer goods has increased, which increased demand for plastics and rubbers produced with the help of petrochemicals. Other downstream industries, such as the Polystyrene Foam Manufacturing industry (IBISWorld report 32614), also increased purchases of petrochemicals. Polystyrene foam manufacturers buy styrene from petrochemical manufacturers to produce polystyrene foam goods, such as insulation and single-use cups, lids and plates. As housing starts recovered over the past five years, polystyrene foam manufacturers experienced a rise in sales to the construction industry, driving demand for petrochemicals. Chemical manufacturers and plastic product manufacturers similarly increased production as consumer spending expanded and construction activity improved. Lower feedstock prices, coupled with healthy downstream demand, have helped profit improve from 7.4% of revenue in 2012, to an estimated 15.2% in 2017, with number of employees growing at the rate of 2.3% to 9,612 people. Traditionally, countries in the Middle East, such as Saudi Arabia, have dominated oil and oil-related industries. The infrastructure to extract oil and produce petrochemicals in these regions has been in place for a long time. As a result, in 2017, a quarter of US petrochemical imports are expected to come from Saudi Arabia. However, over the past five years, production in the United States has increased, and imports, which satisfied 14.1% of domestic demand in 2012, are only expected to satisfy 6.5% in 2017. Overall, over the five Trade oil prices, making the production of petrochemicals more affordable in the United States than in foreign countries. Fluctuations in the price of oil and gas strongly impact industry revenue Provided to: Concordia University St. Paul (2126004051) | 18 April 2017 Petrochemical Manufacturing in the USJanuary 2017   8 WWW.IBISWORLD.COM Industry Performance Trade continued years to 2017, imports are expected to decrease at an annualized rate of 24.0% to $3.6 billion. As increased domestic production has caused imports to decrease, exports have benefitted and are expected to increase at an annualized rate of 2.1% to $2.1 billion over the five years to 2017. Much of the industry’s export expansion has occurred in the second half of the five-year period. Industry Outlook Over the five years to 2022, the Petrochemical Manufacturing industry’s revenue is projected to grow at an annualized rate of 3.1% to $62.9 billion. During this period, revenue will start to make up ground lost in the past five years, when plummeting oil and gas prices reduced industry sales prices. Nevertheless, input prices are expected to remain suppressed in the short term, but are expected to eventually experience a moderate recovery. Compared with the previous five-year period, industry revenue volatility will ease as overall economic conditions stabilize, but the threat of raw material price volatility will persist in the coming years. Underlying demand is likely to remain healthy, with petrochemical manufacturers expected to experience increased purchases from key downstream industries. Moreover, manufacturers will continue to expand operations domestically to take advantage of resources in costadvantageous regions. Input price volatility The collapse in oil and gas prices in late 2014 will reverberate throughout the industry in the first half of the upcoming five-year period, before price and output levels reach a new equilibrium. However, the ride will be bumpy as input prices continue to fluctuate before steadily recovering once supply is restricted to meet worldwide demand conditions. With oil and gas prices at record lows, profit margins have spiked to unsustainable levels in 2017. As a result of an increased supply of petrochemicals coupled with recovering input prices, IBISWorld expects profit margins to decrease over the upcoming five-year period. However, because profit margins expanded suddenly when purchase costs fell in 2014, future profit margins will remain favorable when compared with historic norms. Chemical and plastic product manufacturing is anticipated to grow over the five years to 2022, increasing demand for petrochemicals. Downstream users of petrochemicals, such as plastic and rubber manufacturers, will increase demand due to increased chemical intake from customers even further downstream in the construction and packaging industries. In addition, polystyrene foam manufacturers will increase their petrochemical purchases as residential construction rises. From 2017 to 2022, housing starts are expected to increase, causing builders to demand more insulation. Since insulation is made of Downstream industries to buy more petrochemicals Future profit margins will remain favorable when compared with historic norms Provided to: Concordia University St. Paul (2126004051) | 18 April 2017 Petrochemical Manufacturing in the USJanuary 2017   9 WWW.IBISWORLD.COM Industry Performance Downstream industries to buy more petrochemicals continued polystyrene foam derived from petrochemical styrene, higher demand for houses will boost the need for styrene. This will lead to industry revenue increasing by 4.4% in 2018. With increased demand both domestically and globally, imports and exports are expected to grow. Export growth will be driven by increased capacity in the United States and an abundance of available feedstock. Exports are expected to grow at an New facilities come online Over the previous five-year period, as the price of natural gas in the United States fell below that of the global price, petrochemical manufacturers began to expand US operations. The overall trend of increasing domestic supply of petrochemical inputs has resulted in new industry entrants. This trend is likely to continue, with the number of industry establishments forecast to increase an annualized 1.5% to reach 56 in 2022. This is evidenced in Dow Chemical’s start of construction in 2014 on a new $1.7-billion ethylene plant in Freeport, TX. The new plant will have the capacity to produce 1.5 million tons of ethylene per year, making it Dow’s largest plant worldwide. Other industry participants have followed suit, but because of the high-capital investment and complexity involved in creating a new plant, many of them will not become operational until the second half of the decade. Once these plants do become operational, the industry is expected to experience strong revenue growth. As a result, IBISWorld annualized rate of 2.3% to $2.3 billion over the five years to 2022. Over the five-year period, the trade-weighted index, which measures the value of the dollar compared with the currencies of its trading partners, is expected to increase. The increase will benefit imports by making foreign goods more affordable, helping imports grow at an annualized rate of 3.9% to $4.4 billion over the period. However, imports will remain vastly below previous levels. Increasing domestic supply of petrochemical inputs has resulted in new industry entrants expects industry employment to grow at an annualized rate of 2.1% to 10,676 workers over the five years to 2022. As new production facilities are slated to come online, the supply of petrochemicals, such as polyethylene, will increase substantially. According to GlobalData, polyethylene demand is expected to increase in the mid-single digits per year between 2013 and 2018, surpassing record demand experienced from 2003 to 2013. Some risk does exist, however, as input price volatility will also affect the viability of future projects, with the possibility that some upstream projects are delayed or abandoned altogether as lower sales prices limit project profitability. Provided to: Concordia University St. Paul (2126004051) | 18 April 2017 Petrochemical Manufacturing in the USJanuary 2017   10 WWW.IBISWORLD.COM Industry Performance Life Cycle Stage The industry features established products and brands The industry involves clearly defined product groups and user industries % Growth in share of economy Growth has stabilized following a period of extreme revenue volatility 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 5 Oil Drilling & Gas Extraction Petrochemical Manufacturing 0 Oxygen & Hydrogen Gas Manufacturing Textile Mills Plastic & Resin Manufacturing -5 -10 -10 Decline Petroleum Refining -5 0 5 Shrinking economic importance 10 15 20 % Growth in number of establishments SOURCE: WWW.IBISWORLD.COM Provided to: Concordia University St. Paul (2126004051) | 18 April 2017 Petrochemical Manufacturing in the USJanuary 2017   11 WWW.IBISWORLD.COM Industry Performance Industry Life Cycle This industry is M  ature The Petroleum Manufacturing industry is in the mature stage of its life cycle. Industry value added (IVA), which represents the industry’s contribution to the overall economy, is expected to increase at an annualized rate of 2.6% from 2012 to 2022. This figure indicates that the industry is growing at a much higher rate to the overall economy, which when measured by US GDP is expected to grow at an annualized rate of 2.0% from 2012 to 2022. An industry with IVA trends that follow that of the overall economy is typically classified as an industry in its mature phase. Although industry revenue has decreased in the current five-year period, IVA has been supported by growing profit margins, with income levels proving more stable. The abnormal IVA growth rate can be attributed to the increase in profit margins over the past five years due to the fall in crude oil and natural gas prices, both of which are the main feedstocks for petrochemical manufacturing. Therefore, even though revenue has declined over the past five years, operating margins have increased to an estimated 15.2% in 2017. Key players in the industry are vertically integrated oil and gas companies and therefore a loss in their upstream businesses has been offset by higher margins from their downstream operations mainly the broader chemical market. Additionally, the existence of clearly segmented product groups and user industries is indicative of the industry’s mature phase. The industry’s downstream users continue to be other chemical manufacturers that use petrochemicals as feedstock such as the Polystyrene Foam Manufacturing industry (IBISWorld report 32614). No new products, which could boost this industry into a growth phase, are expected to be introduced. Major players of this industry continue to be large integrated oil companies who practice vertical integration to exploit cost advantages, making it tough for new entrants. This theme is expected to continue, as establishments are estimated to increase at an annualized rate of 0.2% from 2012 to 2022. The increase in establishments will comprise of smaller companies and is not expected to have any significant impact on major player’s market share. Provided to: Concordia University St. Paul (2126004051) | 18 April 2017 Petrochemical Manufacturing in the USJanuary 2017   12 WWW.IBISWORLD.COM Products & Markets Supply Chain | Products & Services | Demand Determinants Major Markets | International Trade | Business Locations Supply Chain KEY BUYING INDUSTRIES 31310 Textile Mills in the US The Textile Mills industry buys products, such as propylene and paraxylene, to be used in fiber manufacturing. 32521 Plastic & Resin Manufacturing in the US The Plastic and Resin Manufacturing industry purchases petrochemicals for polymer production. 32561 Soap & Cleaning Compound Manufacturing in the US The Soap and Cleaning Compound Manufacturing industry uses products, such as benzene, to produce detergents and surfactants. 32614 Polystyrene Foam Manufacturing in the US The Polystyrene Foam Manufacturing industry uses styrene to manufacture polystyrene foam products (e.g. food containers). 32616 Plastic Bottle Manufacturing in the US The Plastic Bottle Manufacturing industry uses ethylene to produce beverage containers. KEY SELLING INDUSTRIES Products & Services 21111 Oil Drilling & Gas Extraction in the US The Oil Drilling and Gas Extraction industry supplies recycled glass and cullet that is used in security glass manufacturing. 32411 Petroleum Refining in the US The Petroleum Refining industry is the main supplier of feedstock used in the petrochemical manufacturing process. 32511 Petrochemical Manufacturing in the US The Petrochemical Manufacturing industry sources raw materials from within, reflecting the high level of interdependency between the various players and products produced. Products and services segmentation (2017) 0.4% All Other 38.4% Aromatics (benzene, toluene, xylene, etc.) 61.2% Liquefied refinery gases (aliphatics) Total $54.1bn This industry primarily converts feedstock derived from petroleum or from petroleum and natural gas liquids into SOURCE: WWW.IBISWORLD.COM petrochemicals. These petrochemicals include aliphatic hydrocarbons (61.2% of revenue) and cyclic aromatic Provided to: Concordia University St. Paul (2126004051) | 18 April 2017 Petrochemical Manufacturing in the USJanuary 2017   13 WWW.IBISWORLD.COM Products & Markets Products & Services continued hydrocarbons (38.4% of revenue). Acyclic hydrocarbons are made from refined petroleum or liquid hydrocarbons. Key products within this group includes ethylene, propylene, butadiene. On the other hand, Aromatic hydrocarbons are both cyclic and unsaturated. Key products within this group includes benzene, toluene and xylene. Ethylene Estimated to be the world’s most widely used petrochemical in terms of worldwide production volume, ethylene is the key building block in the production of polyethylene (polyethylene accounts for 50.0% of all ethylene production), ethylene oxide (10.0% of ethylene production) and its range of derivatives (such as ethylene glycol). It also is used to produce vinyl acetate, polyvinyl chloride, polyester fiber and film, and a range of alcohols and solvents. An estimated 60.0% of total US ethylene production capacity uses liquefied natural gas, with a further 38.0% derived using naphtha. Over the five years to 2017, demand for ethylene has fluctuated in line with demand for plastics, as ethylene-based chemicals are used most often in plastic production. Propylene During the production of ethylene, several other chemicals are also produced, including propylene, which is then used to produce polypropylene. Downstream applications of propylene include producing plastics, packaging materials, beverage containers and personal care products, including cosmetics. Over the past five years, demand for the segment has fluctuated in line with demand from downstream users. Hydrocarbons Toluene is an aromatic hydrocarbon used in making dyes, photographic chemicals and pharmaceuticals. It is also used as a solvent and additive for aviation gasoline. Demand for this product slightly decreased during the downturn as aviation activity fell. In addition, this industry produces benzene, which is also an aromatic hydrocarbon. Because it is a known carcinogen, its uses in gasoline are limited, but it is used to produce synthetic rubber, plastics and dyes. The industry also manufactures cumene and ethylbenzene. Cumene is converted to cumene hydroperoxide, which is an intermediate in the synthesis of other important industry chemicals, such as phenol and acetone. Ethylbenzene is an intermediate product used to produce styrene. Butadiene Butadiene is the most widely used feedstock used to produce synthetic rubber products. It is used to manufacture styrene butadiene rubber (SBR), polybutadiene (BR), styrene butadiene latex (SBL) and acrylonitrile butadiene styrene (ABS). Styrene is another petroleum byproduct and the primary raw material from which polystyrene is produced. First used in the production of synthetic rubber, styrene is currently used in a variety of commercial polystyrene products, including expandable polystyrene (commonly known as Styrofoam). Demand for styrene from packaging manufacturers has fallen slightly over the past five years as consumers began to switch from polystyrene foam products to paper products. Paper products are more environmentally friendly. Provided to: Concordia University St. Paul (2126004051) | 18 April 2017 Petrochemical Manufacturing in the USJanuary 2017   14 WWW.IBISWORLD.COM Products & Markets Demand Determinants Major Markets Demand for petrochemicals is determined by a number of factors due to their broad range of end users. Primarily, petrochemicals are used internally in the production of other petrochemicals. For example, demand for propylene is determined by the demand for polypropylene. Essentially, demand for petrochemicals depends heavily on its downstream users, such as the Plastic and Resin Manufacturing industry (IBISWorld report 32521). The end products produced by petrochemicals tend to be cyclical in nature, making the Petrochemical Manufacturing industry cyclical as well. Some of the products produced include household and construction items, such as plastic cups, lids and insulation in homes. As such, consumer spending is a major determinant due to the ties the industry has to numerous durable and non-durable items. This has been evidenced over the past five years, as the recovery of the domestic economy was to a large extent reflected by growth in the Petrochemical Manufacturing industry. However, volatile commodity prices, especially crude oil prices led to decline in demand for industry products for the majority of the past five years. As consumer spending improves, industry revenue will follow suit. Consumer spending is expected to increase in the coming years, benefiting the industry. Major market segmentation (2017) 12.3% Other domestic chemical manufacturers 3.8% Exports 20.1% Polystyrene foam manufacturers 63.8% Plastic, resin and synthetic rubber manufacturers Total $54.1bn Almost all products manufactured by this industry are resold into the chemical manufacturing sector or used for various internal chemical processes. A number of petrochemicals from this industry are used to manufacture chemicals included in other classes (xylene) or are coproduced with other petrochemicals (ethylene and propylene). More than 90.0% of liquefied refinery gases (aliphatics) manufactured in SOURCE: WWW.IBISWORLD.COM petrochemical plants are produced for use as a chemical raw material. In the case of aromatics, the proportion is nearly just as high at 88.0%. Plastic, resin and synthetic rubber manufacturers The plastic, resin and synthetic rubber manufacturers are primary users of the petrochemicals manufactured. The industry purchases ethylene and Provided to: Concordia University St. Paul (2126004051) | 18 April 2017 Petrochemical Manufacturing in the USJanuary 2017   15 WWW.IBISWORLD.COM Products & Markets propylene to produce polypropylene, a highly demanded plastic used for packaging film, carpet fibers and numerous household appliances. As the economy continues to rebound, the demand for plastic should improve. In 2017, plastic, resin and synthetic rubber manufacturers are estimated to contribute to 63.8% of industry revenue. Polystyrene foam manufacturers The Polystyrene Foam Manufacturing industry (IBISWorld report 32614) is another key buyer. The industry purchases styrene to make expanded polystyrene, which is used to manufacture single-use cups, lids and food trays. During the downturn, food retailers demanded less of the products produced by polystyrene, causing revenue to dip, but as conditions improve revenue has rebounded. In December of International Trade Level & Trend  xports in the E industry are L ow and I ncreasing Imports in the industry are Mediumand Decreasing International trade in this industry has fluctuated a great deal over the past five years. Nevertheless, the industry is marked by an overall trend toward sourcing and supplying petrochemicals domestically. Imports consistently satisfy a large portion of domestic demand due to the infrastructure already in place in foreign countries. However, due to increased domestic production, imports went from satisfying 14.1% of domestic demand in 2012 to 6.5% in 2017. This decline can be attributed to higher production capacity by domestic manufacturing facilities due to the abundance of affordable feedstock. Over the five-year period, imports have fluctuated wildly, falling by as much as half in 2015 when commodity prices collapsed. Overall, imports have declined at an annualized rate of 24.0% in the past five years. In the same period, exports have also been extremely volatile. In 2012, exports decreased by 10.3% as local supply 2013, New York City imposed a ban on Styrofoam food trays and, with other cities following suit, revenue from this segment may decline in the future if more cities and regions ban Styrofoam products. In 2017, this market is expected to contribute 20.1% of industry revenue. Other domestic chemical manufacturers As mentioned above, the Petrochemical Manufacturing industry is a supplier of downstream chemical manufacturers. These manufacturers demand petrochemicals to produce other intermediate chemicals that eventually become products like insulation, roof shingles, and waxes. Key buyers of petrochemicals in the other category include vinyl acetate, polyurethane and polyester manufacturers. In 2017, this segment is expected to contribute to 12.3% of industry revenue. Industry trade balance 5 0 $ billion Major Markets continued -5 -10 -15 -20 Year 09 Exports 11 13 Imports 15 17 19 21 23 Balance SOURCE: WWW.IBISWORLD.COM improved. Exports declined by a further 9.3% in 2014, as emerging markets slowed and the value of the dollar increased. While exports have been volatile, the overall impact on the industry has been negligible as exports consistently make up under 5.0% of revenue. In 2017, the industry will Provided to: Concordia University St. Paul (2126004051) | 18 April 2017 Petrochemical Manufacturing in the USJanuary 2017   16 WWW.IBISWORLD.COM Products & Markets International Trade continued generate an estimated $2.1 billion in export earnings, accounting for 3.8% of industry revenue. Key export markets include Canada and Belgium, which account for 23.6% and 7.8% of total exports, respectively, while Mexico accounts for 14.2% of exports. Canada and Mexico are key trading partners with Exports To... the United States because of close proximity and the North American Free Trade Agreement (NAFTA). This agreement essentially eliminated all trade barriers between the United States, Mexico and Canada. Over the past five years, exports have overall increased at an annualized rate of 2.1%. Imports From... 8.3% Iraq 7.8% 8.6% 27.2% 14.5% Belgium All Other Venezuela Colombia 45.8% All Others 14.2% Mexico 24.1% Saudi Arabia 23.6% Canada 25.9% Canada Year: 2017 Total $2.1bn Total $3.6bn SIZE OF CHARTS DOES NOT REPRESENT ACTUAL DATA Provided to: Concordia University St. Paul (2126004051) | 18 April 2017 SOURCE: USITC Petrochemical Manufacturing in the USJanuary 2017   17 WWW.IBISWORLD.COM Products & Markets Business Locations 2017 West New England AK 0.0 WA Rocky Mountains ID 0.0 West NV 0.0 0.0 SD 0.0 WY 0.0 MN 0.0 0.0 OR Great Lakes ND MT 0.0 Plains CO 0.0 KY 0.0 9 OK 0.0 NC 0.0 TN AZ NM 1.7 0.0 Southwest TX 46.6 HI 0.0 Additional States (as marked on map) 1 VT 2 NH 3 MA 4 RI 5 CT 6 NJ 7 DE 8 MD 0.0 3.4 0.0 3.4 0.0 1.7 SC Southeast 0.0 MS AL 1.7 5.2 GA 0.0 0.0 LA 12.1 FL 1.7 Establishments (%) 0.0 1.7 AR 8 0.0 0.0 1.7 7 WV VA 0.0 3.4 0.0 CA West 0.0 MO KS 0.0 OH 0.0 3.4 6 3.4 IN IL 0.0 UT PA 3.4 0.0 0.0 1 2 3 NY 1.7 5 4 MI 3.4 IA NE 0.0 WI ME MidAtlantic 9 DC 0.0 Less than 3% 3% to less than 10% 10% to less than 20% 20% or more SOURCE: WWW.IBISWORLD.COM Provided to: Concordia University St. Paul (2126004051) | 18 April 2017 Petrochemical Manufacturing in the USJanuary 2017   18 WWW.IBISWORLD.COM Products & Markets Distribution of establishments vs. population 50 40 30 20 10 Southwest Southeast Plains New England Rocky Mountains Establishments Mid-Atlantic Great Lakes 0 West There are 52 establishments in the Petrochemical Manufacturing industry and its major players are located primarily in Texas, which is estimated to account for an estimated 46.8% of establishments. Overall, the two key regions are the Southwest and the Southeast, which together account for over three-quarters of all establishments. The Gulf Coast is a dominant petrochemical production region due to its location near the gulf and proximity to major natural gas and oil hubs. As such, about 76.0% of North America’s ethylene capacity is located along the Gulf Coast. This geographic phenomenon partly reflects the industry’s reliance on feedstock, such as refined petroleum or liquid hydrocarbons. Large plants that produce primary olefins, such as ethylene, propylene and butadiene, require a considerable and reliable supply of petroleum-based feedstock, including naphtha, ethane or propane. Therefore, petrochemical manufacturers tend to be located near petroleum refineries to ensure an adequate supply of % Business Locations Population SOURCE: WWW.IBISWORLD.COM feedstock. As in the past, key industry players are often refiners, such as Exxon Mobil and Royal Dutch Shell, which operate integrated refinery and petrochemical complexes that produce a range of building block petrochemicals, in addition to petroleum. Provided to: Concordia University St. Paul (2126004051) | 18 April 2017 WWW.IBISWORLD.COM Petrochemical Manufacturing in the US January 2017   19 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 M  edium Key Success Factors IBISWorld identifies 250 Key Success Factors for a business. The most important for this industry are: Cost Structure Benchmarks The Petrochemical Manufacturing Industry has a medium level of concentration with the top four players accounting for 54.4% of industry revenue. Industry concentration has risen over the five years to 2017. In 2012, the top four players, accounted for under 50.0% of the industry’s total revenue. The rise in market share concentration is a reflection of the volatility in gas and oil prices; smaller companies have struggled to capture market share as revenue pressures have advantaged the larger players, who benefit from economies of scale. The relatively small number of players in this industry, and subsequently high concentration level, is due to the significant capital investment required to enter the industry. The cost of building a refining plant can be in the hundreds of millions of dollars on the low end. For example, major player LyondellBasell spent $420.0 million just to expand their preexisting Texas refinery. As such, companies within the industry tend to be large, vertically-integrated multinational corporations that also participate in the oil refining business leading to further market share concentration. Having contracts that are favorable to purchaser Access to competitively priced raw materials help control costs and is vital to remaining competitive. downstream polymer and chemical production are more likely to succeed. Vertical integration helps companies gain upstream and downstream profit margins. Optimum capacity utilization In an industry where demand and supply imbalances can create considerable volatility, the ability to use existing capacity to its optimum efficiency is essential. Economies of scale The need for low-cost, world-class manufacturing facilities operating on a large scale is essential in this intensely competitive industry. Upstream vertical integration (ownership links) Operators that control operations from feedstock and raw materials to Provision of superior after sales service With very little product differentiation, companies must differentiate themselves by providing better quality service. Profit In recent years, profit margins for petrochemical manufacturers have benefited from increased demand and access to affordable feedstock, most notably ethane derived from natural gas. Demand for petrochemicals was strong, effectively driving up prices of popular petrochemicals such as ethylene. Higher prices for petrochemicals and lower input costs relative to foreign producers have helped profit margins expand. When producing petrochemicals, manufacturers have the option of using feedstock derived from natural gas or crude. As a result of fracking and horizontal drilling technology, natural gas prices in the United States were 2.5 to 3.0 times less expensive than world prices for much of the past five years. This has helped domestic manufacturers enjoy higher profit margins than foreign manufacturers in most regions. As a result, profit margins grew consistently at Provided to: Concordia University St. Paul (2126004051) | 18 April 2017 WWW.IBISWORLD.COM Petrochemical Manufacturing in the US January 2017   20 Competitive Landscape the start of the period, from 7.4% in 2012, to figures in the high-teens through to 2014 and 2015. In 2015 and 2016, world oil and gas prices collapsed, spiking up industry profit margins to reach an expected 15.2% in 2017. Oil and gas represent the key input costs for this industry, so the decrease in input prices slashed industry purchase costs. Producers are not expected to fully pass on savings on input costs further down the supply chain, pushing up profit margins. However, in many instances of major oil and gas companies, their high level of vertical integration means that value-added services are accumulated along the supply chain and measured by way of intra-company transactions between accounts. Nevertheless, oil and gas prices are set to be very volatile, and IBISWorld expects profit margins to fall as oil and gas prices recover. Purchases Purchases of raw materials are the industry’s largest cost. Of these costs, the largest items include raw hydrocarbon materials such as crude oil and natural gas liquids, as well as naphtha, liquefied petroleum gas and condensate. In recent years, the cost of these raw materials has been highly volatile. Industry participants that have the ability to use a wide range of raw materials are less affected by swings in feedstock prices than competitors who rely on one type of feedstock. This category also encompasses transport costs associated with the acquisition of feedstock in those instances in which industry participants are not part of an integrated refinery or petrochemical complex. Initially, purchase costs were increasing as the price of natural gas and crude oil increased steadily, with world demand outstripping supply. This grew purchase costs to 61.3% of industry revenue in 2012. However, the collapse of world oil Sector vs. Industry Costs Average Costs of all Industries in sector (2017) 100 7.8 80 60 40 20 20.1 n Profit n Wages n Purchases n Depreciation n Marketing n Rent & Utilities n Other 49.7 54.0 2.6 2.2 Industry Costs (2017) 15.2 2.1 12.2 Percentage of revenue Cost Structure Benchmarks continued 0.6 2.1 3.2 0.1 27.6 0 SOURCE: WWW.IBISWORLD.COM Provided to: Concordia University St. Paul (2126004051) | 18 April 2017 WWW.IBISWORLD.COM Petrochemical Manufacturing in the US January 2017   21 Competitive Landscape Cost Structure Benchmarks continued and gas prices from the second half of 2014 impacted this industry a great deal, and purchase costs were slashed and now represent an estimated 49.7% of industry revenue in 2017. Once again, the high volatility of these input prices will result in purchase costs varying greatly across the industry over the next five years, but will on the whole increase as prices recover. Wages The Petrochemical Manufacturing industry is high-tech and the manufacturing process of chemicals is largely automated. Due to the complexity of the machines used to produce petrochemicals, engineers and highly skilled workers are employed, as a result, the average wage in 2017 is expected to be close to $116,091. While average wages are high, employees typically add a large amount of value. In 2017, IBISWorld estimates that the average industry employee generates $5.6 million in revenue for the establishment. As a result, wages account for just 2.1% of industry revenue. Basis of Competition Level & Trend  ompetition C in this industry is Mediumand the trend is I ncreasing 2.1% of revenue. Depreciation costs include equipment, machinery, facilities, vehicles and other capital investments. Over the five-year period, operators have made large up-front investments in manufacturing automation, as well as in the expansion of existing facilities. With revenue falling markedly in 2015 and 2016, depreciation as a percentage of revenue has increased despite remaining steady in real terms. With relatively stable capital expenses, robust revenue growth would likely cause this figure to be diluted. Depreciation In 2016, IBISWorld estimates depreciation expenses will account for Other Rent and utilities are expected to account for just 3.2% of revenue in 2017, a figure generally consistent across the industry. Marketing costs are also expected to account for less than 1.0% of revenue. This industry generally has very low marketing costs, as most downstream customers are other chemical or manufacturing industries. As a result, most customers are familiar with this industry’s operators and products, limiting the need for marketing. Other expenses include maintenance, research and development (R&D), administrative, communication and distribution costs. Internal Competition The Petrochemical Manufacturing industry is a highly competitive marketplace with numerous large industry participants searching for global dominance. Primarily, the competition is based on price, quality, delivery and, to an extent, customer service. There is high industry consolidation in the industry with major oil and gas exploration and production companies dominating the broader chemical business as well. Due to the size of major players and their global competitiveness, internal competition primarily stems from price and location. By building plants close to suppliers’ feedstock, operators can cut down on input costs. With a glut of domestic natural gas and other feedstock readily available, thanks to new shale technology, companies will try to compete internally by expanding and building locations in close proximity to various oil rich shale’s. Exxon, the country’s largest oil refiner, is currently expanding their Texas facilities to take advantage of the close proximity to the gulf as well as further integrate the petroleum and petrochemical refining process. Other operators such as Provided to: Concordia University St. Paul (2126004051) | 18 April 2017 WWW.IBISWORLD.COM Petrochemical Manufacturing in the US January 2017   22 Competitive Landscape Basis of Competition continued LyondellBasell and Royal Dutch Shell are following suit. Most technologies used by this industry are widely available, adding to competitive pressures. Industry player TPC Group, which is one of the largest producers of butadiene, states that its competitive advantage derives from its position as the largest merchant crude butadiene processor in the world, with the ability to secure raw material supplies. Its flexible production processes, which are responsive to changes in customer demand levels, provide another competitive advantage. External Competition On an international scale, US industry participants have traditionally competed on the basis of the size of their large Barriers to Entry Level & Trend  arriers to Entry B in this industry are Highand S  teady Barriers to entry into the Petrochemical Manufacturing industry are high, and are expected to remain that way. This industry faces a number of barriers to entry, a major one being the level of capital required. The costs to construct a plant can range anywhere from a couple hundred million to billions of dollars. For example, Dow Chemical Co. is in the works of securing permits to construct a $1.7 billion plant in Freeport, TX. Aside from the costs of building a plant, regulatory costs are high as well. Because the industry deals with chemical waste and emissions, companies are subject to rules set by the Environmental Protection Agency. With regulation increasing, these costs are expected to remain high as well, for example, in 2015 Exxon Mobil spent $5.6 billion on environmental expenditures. Given the heavy reliance on various feedstocks, such as natural gas liquids and petroleum, the ability to access a steady integrated complexes and the level of installed capacity, combined with the benefits of strong infrastructure and considerable customer reach. However, they are now facing increasing competition from various petroleum-rich countries that have recently expanded their petrochemical industries. For example, in the case of ethylene, the development of large-scale, low-cost, export-oriented plants located in the Middle East has adversely affected relevant US producers. Saudi Arabia’s ethylene capacity more than doubled in the 2000s. South Korea and China also are growing their petrochemical industries to become significant petrochemical exporters. As a result, imports generally account for less than 10.0% of domestic demand. Barriers to Entry checklist Competition Concentration Life Cycle Stage Capital Intensity Technology Change Regulation & Policy Industry Assistance Medium Medium Mature High Low Heavy Low SOURCE: WWW.IBISWORLD.COM supply of competitively priced raw materials is essential. Many of the established players are part of integrated oil companies that operate in integrated oil refining and petrochemical complexes, a position that gives them a significant competitive edge over potential standalone newcomers. Significant competition also comes from imported products. Infrastructure in oil rich nations, such as Saudi Arabia, continues to satisfy a large portion of domestic demand. Provided to: Concordia University St. Paul (2126004051) | 18 April 2017 WWW.IBISWORLD.COM Petrochemical Manufacturing in the US January 2017   23 Competitive Landscape Industry Globalization The industry has a moderate level of globalization, reflecting its geographic spread. A number of industry participants operate and compete on a global scale, a development that is simultaneously occurring among the industry’s downstream customers. For example, Dow Chemical Company has plants in about 36 countries, giving it a major Level & Trend  lobalization G in this industry is Lowand the trend is I ncreasing International trade is a major determinant of an industry’s level of globalization. Trade Globalization Import competition can bring a greater risk for companies as foreign producers satisfy domestic demand that local firms would otherwise supply. Going Global: Petrochemical Manufacturing 2005-2017 Global Export 150 100 50 0 Local 0 Petrochemical Manufacturing Import 40 160 80 120 Imports/Domestic Demand 200 Export Exports/Revenue Exports offer growth opportunities for firms. However there are legal, economic and political risks associated with dealing in foreign countries. Exports/Revenue 200 global presence. This geographic dispersion also allows the company to switch between country and region to use cost-advantaged feedstock, helping alleviate the effects of highly volatile energy prices. Given the commodity nature of many of the products, prices also tend to be set on the world stage, adding to the globalized nature of the industry. Global 150 100 50 0 Local 0 2017 2005 40 Import 80 120 160 Imports/Domestic Demand SOURCE: WWW.IBISWORLD.COM Provided to: Concordia University St. Paul (2126004051) | 18 April 2017 Petrochemical Manufacturing in the USJanuary 2017   24 WWW.IBISWORLD.COM Major Companies LyondellBasell Industries | Chevron Phillips Chemical Company LLC Ineos Group | Other Companies Major players (Market share) Chevron Phillips Chemical Company LLC 12.7% 50.2% Other Ineos Group 6.5% Player Performance LyondellBasell Industries Market share: 30.6% LyondellBasell Industries 30.6% Headquartered in the Netherlands, LyondellBasell was formed in 2007 from the merger of privately owned Lyondell Chemical Company and Basell Olefins, a joint venture between BASF and Royal Dutch Shell. By revenue, it is currently the seventh-largest chemical company in the world. It has roughly 13,000 employees worldwide, with 6,000 of them located in the United States. Lyondell’s worldwide exposure stretches 18 countries and all six major continents. While the industry as a whole was hit hard by the downturn, LyondellBasell was especially damaged as the drop in demand forced the company into Chapter 11 bankruptcy in January 2009, marking the largest bankruptcy ever in the chemical sector. Upon filing, Lyondell had $26.0 billion in debt on its balance sheet, roughly 13 times its operating earnings. While much of this debt was SOURCE: WWW.IBISWORLD.COM expected to be paid following the merger that created the company, the collapse of petrochemical demand during the global recession severely strained the company’s balance sheet. LyondellBasell was able to fix its problems and emerged from bankruptcy in April 2010. Currently LyondellBasell operates five business segments: Olefins and Polyolefins Americas; Olefins and Polyolefins EAI; intermediates and derivatives; refining; and technology. Of these, the Olefins and Polyolefins Americas segment and intermediates and derivatives is relevant to the industry. Lyondell has been committed to improving operational efficiency. As a result, LyondellBasell has dedicated $1.2 billion to invest in the expansion of current facilities in an effort to increase US ethylene production. The company has announced a planned capital expenditure LyondellBasell (Olefins and Polyolefins; Americas Segment) - Financial Performance* Year Revenue ($ million) (% change) Operating Income ($ million) 2012 22,592.0 N/C 2,327.0 N/C 2013 22,561.0 -0.1 2,650.9 13.9 2014 26,913.0 19.3 3,364.1 26.9 2015 17,736.0 -34.1 3,325.5 -1.1 2016 15,475.0 -12.7 2,520.3 -24.2 2017 16,568.8 7.1 2,625.4 4.2 *Estimates Provided to: Concordia University St. Paul (2126004051) | 18 April 2017 (% change) SOURCE: ANNUAL REPORT AND IBISWORLD Petrochemical Manufacturing in the USJanuary 2017   25 WWW.IBISWORLD.COM Major Companies Player Performance continued of an estimated $992.0 million dollars in 2016 in its industry-relevant Olefins and Polyolefins Americas segment, especially at the Corpus Christi, TX facility where the company expects to produce 800.0 million pounds of ethylene per year. Player Performance Chevron Phillips Chemical Company LLC Market share: 12.7% Financial performance Over the five years to 2017, IBISWorld expects LyondellBasell’s industry-specific revenue to fall at an annualized rate of 6.0% to $16.6 billion. The declining crude oil prices resulted into lower average sales prices, leading to the fall in revenue over the five-year period. Nevertheless, earnings have increased for the company at an annualized rate of 2.4% over the five years to 2017, as low natural gas prices have created favorable conditions to produce ethane from natural gas, instead of using more expensive naphtha, which is derived from crude oil. The use of more affordable feedstock, coupled with increased demand, has helped profit margins grow, despite the drop in production revenue. Chevron Phillips Chemical (CPChem) is a 50-50 joint venture formed in 2000 between Chevron Corp. and Phillips Petroleum Company, now Phillips 66. CPChem currently operates 36 facilities in eight countries and employs nearly 5,000 people worldwide, making it one of the leading olefin and polyolefin producers in the world. Headquartered in The Woodlands, TX, CPChem is solely focused on the business of producing and selling petrochemicals. In recent years, CPChem has been focused on increasing its output. As a result, in the first quarter of 2014, the company expanded an existing facility by 20.0% and began construction on the world’s largest on-purpose 1-hexane plant in Baytown, TX. In 2016, the company announced that the Baytown expansion is near completion and the company expects to have the facility in full operation in 2017. With this expansion, the company is expected to produce an estimated 1.5 million metric tons of ethylene a year. Furthermore, the company is also expanding up the supply chain with the construction of two new polyethylene plastics plants in the Houston area. Chevron Phillips Chemical Company (US Operations) - financial performance Year Revenue ($ million) (% change) Operating Income ($ million) 2012 9,397.7 N/C 1,328.6 N/C 2013 9,341.3 -0.6 1,949.0 46.7 2014 9,532.4 2.0 2,336.2 19.9 2015 6,570.9 -31.1 1,883.6 -19.4 2016 6,001.4 -8.7 1,279.0 -32.1 2017 6,884.7 14.7 1,709.4 33.7 *Estimates Provided to: Concordia University St. Paul (2126004051) | 18 April 2017 (% change) SOURCE: ANNUAL REPORT AND IBISWORLD Petrochemical Manufacturing in the USJanuary 2017   26 WWW.IBISWORLD.COM Major Companies Player Performance continued Financial performance CPChem provides financial results but does not segment out revenue by production location. According to IBISWorld estimates, industry-specific revenue decreased at an annualized rate of 6.0% to $6.9 billion over the five years to 2017. The company experienced strong downstream demand as a result of the economic recovery, yet 2012 and 2013 were difficult due to lower production volume. An estimated fall in industry relevant revenue of 31.1% has been recorded for 2015, as with all industry major players, due to lower petrochemical prices dragging down sales value. Even with revenue falling over these two years, CPChem has been able to increase operating income as a result of operational efficiency and widening margins, increasing at an annualized rate of 5.2%. Player Performance Ineos Group was formed through a series of acquisitions by its predecessor Inspec, which in itself was formed by a management buy-in of British Petroleum’s (BP) chemical arm in 1992. The company grow rapidly through a series of acquisitions in the late 90’s and early 2000’s. One of the major acquisition was the purchase of BP’s olefins and derivatives business in 2005. Today, the company is one of the largest chemical manufacturers in the world. The company employs 20,000 people and had $40.0 billion in total revenue in 2015 (latest available data). The company operates in several segments within the chemical industry, with 12 distinct segments such as petrochemicals, specialty chemicals and oil products. Ineos is Europe’s largest producer and buyer of Ethylene. The Ineos olefins and Polymers US business is industry relevant. Over the past five years, the company has continued to grow its operations in North America by increasing its capacity at the company’s Battleground complex at La Porte, TX. In 2016, the company announced the acquisition of WLP Holding Corp., a manufacturer of high density polyethylene (HDPE) pipes in North America. With this acquisition the company continues to expand further up the supply chain. Ineos Group Market share: 6.5% Financial performance The US business has seven facilities with two major integrated sites in Texas. The The Ineos Group (US Operations) - financial performance* Year Revenue ($ million) (% change) Operating Income ($ million) (% change) 2012 4,242.6 N/C 951.1 N/C 2013 4,276.1 0.8 1,109.8 16.7 2014 5,000.0 16.9 944.0 -14.9 2015 3,403.2 -31.9 1,124.0 19.1 2016 3,181.1 -6.5 606.6 -46.0 2017 3,538.3 11.2 837.1 38.0 *Estimates SOURCE: IBISWORLD Provided to: Concordia University St. Paul (2126004051) | 18 April 2017 Petrochemical Manufacturing in the USJanuary 2017   27 WWW.IBISWORLD.COM Major Companies Player Performance continued company manufactures more than 7.5 billion pounds of ethylene, propylene, crude, benzene, high density polyethylene and polypropylene and has 972 employees with an estimated turnover of $5.0 billion dollars in 2014. The company is privately held and does not disclose all its revenue figures. IBIS world expects industry-relevant revenue to decrease at an annualized rate of 3.6% over the five years to 2017 to be at an estimated $3.5 billion in 2017. Other Companies The Dow Chemical Company merger, the new company will remain a sole entity for 18 to 24 months and then split into three publicly traded entities. One of those entities would solely focus on the Chemical business, making it industry relevant. In 2016, the companies announced that the proposed merger is likely to go through by the end of the first quarter of 2017. Estimated market share: 4.6% Dow Chemical, founded in 1897 and headquartered in Michigan, is the largest chemical company in the United States and the second-largest chemical company in the world, behind BASF. With more than 179 facilities in 35 countries, the company employs 49,495 workers worldwide, about 50.0% of which located in the United States. The company generated total revenue of $48.7 billion in fiscal 2015. Dow operates in six segments: Agricultural Sciences, Consumer Solutions, Infrastructure Solutions, Performance Materials and Chemicals and Performance Plastics, the latter two being relevant to this industry. The company has reorganized its operations, and no longer runs the Feedstocks and Energy segment. Business operations relevant to the Petrochemical Manufacturing industry include the production of benzene, butadiene, butylene, cumene and ethylene. This segment transfers materials to Dow’s derivatives businesses at net cost. Therefore, it relies on other company segments for demand. In 2017, Dow’s industry-specific revenue will reach an estimated $2.4 billion. In 2015, the company announced that it plans to merge with DuPont Co. in a deal valued at $120.0 billion. Both companies announced that they would undertake an all-stock merger of equals transaction and attain an estimated $4.0 billion in synergies. However, the companies also announced that after the Enterprise Products Partners L.P. Estimated market share: 3.7% Originally founded as a wholesale marketer of natural gas liquids in 1968, Enterprise Product Partners has grown into a Fortune 500 company with a leading market position in midstream services. Enterprise currently employs roughly 6,900 people and is headquartered in Houston. For much of the past five years, the company fared well as a result of renewed demand in the domestic economy spurring downstream markets. However, company data indicates that, as a result of falling sales prices, industry-specific revenue declined markedly for full year 2016. With a stabilization of revenue expected in 2017, IBISWorld calculates that Enterprise will generate $2.0 billion of industry-specific revenue. Exxon Mobil Corp. Estimated market share: 3.5% Based in Irving, TX, Exxon Mobil Corp. is the largest oil company in the United States and the third-largest in the world by revenue. Formed out of the merger between Exxon and Mobil Corp. in 1999, Exxon Mobil traces its roots back to the Standard Oil Company founded by John D. Rockefeller. With 77,000 employees in Provided to: Concordia University St. Paul (2126004051) | 18 April 2017 Petrochemical Manufacturing in the USJanuary 2017   28 WWW.IBISWORLD.COM Major Companies Other Companies continued more than 24 countries, Exxon holds about 25 billion oil-equivalent barrels of proven reserves, roughly 1.7% of the global total. Exxon operates three business segments: upstream, downstream and chemical. The upstream and downstream segments refer to the exploration, extraction and refining of oil and gas products. The chemical segment, however, is organized and operates to manufacture and sell petrochemicals. In fact, Exxon has a longstanding history with petrochemicals. In 1920, researchers from Jersey Standard Oil, a spinoff from the breakup of Standard Oil, of which Exxon is a direct descendant, invented isopropyl alcohol, the first commercial petrochemical, more commonly known today as rubbing alcohol. In recent years, Exxon Mobil has looked to combine its downstream and chemical plants, with 90.0% of the company’s chemical capacity being integrated with its large refineries and natural gas plants. Exxon Mobil has also been growing its capacity in Asian markets, as the company expects 60.0% of petrochemical demand growth through 2017 to originate from this area. Exxon has started a fully integrated facility in China and expanded its Singapore Chemical Plant, which reopened for manufacturing in June 2013. In 2017, Exxon Mobil’s industry-relevant revenue is expected to reach $1.9 billion. Royal Dutch Shell PLC Estimated market share: 2.3% Royal Dutch Shell was founded in 1907 through the merger of Royal Dutch Petroleum and Shell Transport & Trading Company. Registered in England and headquartered in the Netherlands, Shell has become a $430.0 billion company with 94,000 employees and operations in more than 70 countries. While originally founded to take advantage of Russian oil exploration, 50.0% of Shell’s production now comes from natural gas, as the company continuously changes its focus to meet current energy demands. Shell currently operates two main business segments: upstream and downstream. Within the downstream segment is the company’s chemical manufacturing subsidiary, Shell Chemical. Founded in 1929, Shell Chemical has been a leader in global chemical production since its inception. In 1931, the company began the first production of ammonia from natural gas. In 1942, the company pioneered the production of butadiene, which is used for manufacturing synthetic rubber. As a result of recent economic turmoil, Shell has looked to expand product lines to more geographic areas. In 2008, the company began production at its first “Only MEG Advantage” (OMEGA) facility in South Korea. Not only does this highlight the company’s focus on further global expansion, but the OMEGA process is Shell’s newest innovation in the search for environmentally friendly refining processes. Since the success of this plant, Shell has opened OMEGA plants in Saudi Arabia and Singapore. In 2017, the industry-relevant chemical segment is expected to generate an estimated $1.2 billion in revenue. Provided to: Concordia University St. Paul (2126004051) | 18 April 2017 Petrochemical Manufacturing in the USJanuary 2017   29 WWW.IBISWORLD.COM Operating Conditions Capital Intensity | Technology & Systems | Revenue Volatility Regulation & Policy | Industry Assistance Capital Intensity The Petrochemical Manufacturing industry requires a high amount of capital investment. In 2017, industry companies will spend $1.02 on capital for every dollar spent on labor, reflecting the high-tech, high-cost nature of the plants used to manufacture the relevant products. The cost of new plants and equipment is significant; for example, industry operator Royal Dutch Shell recently announced plans to build a new $6.0 billion ethane cracker plant in Pennsylvania. The manufacturing process requires a highly-mechanized process that involves large complex machinery that turns feedstock into different chemicals through a process known as cracking. Level The level of capital intensity is H  igh Capital intensity Capital units per labor unit 2.0 1.6 1.2 0.8 0.4 0.0 Economy Manufacturing Petrochemical Manufacturing Dotted line shows a high level of capital intensity SOURCE: WWW.IBISWORLD.COM Capital intensity is expected to remain high over the five years to 2022. While wages account for a nominal share of 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. Oxygen & Hydrogen Gas 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. Textile Mills Plastic & Resin Manufacturing Capital Intensive Labor Intensive New Age Economy Old Economy Agriculture and Manufacturing. Traded goods can be produced Oil Drilling & Gas Extraction using cheap labor abroad. To expand firms must merge Petroleum Refining or acquire others to exploit economies of scale, or specialize in niche, high-value products. Petrochemical Manufacturing Change in Share of the Economy Provided to: Concordia University St. Paul (2126004051) | 18 April 2017 SOURCE: WWW.IBISWORLD.COM Petrochemical Manufacturing in the USJanuary 2017   30 WWW.IBISWORLD.COM Operating Conditions Capital Intensity continued revenue, they have grown over the fiveyear period in relative terms as industry revenue has fallen. High average wage Technology & Systems High-volume bulk petrochemicals, such Level The level of Technology Change is L ow Revenue Volatility Level The level of Volatility is H  igh levels reflect the specialized workforce needed to operate the machinery and conduct research and development. as styrene and ethylene, tend to be manufactured in large-scale, highly capital-intensive petrochemical complexes. These complexes are often integrated with oil refineries and generally operate on a continuous basis. The production of ethylene, which is used to manufacture polyethylene, ethylene oxide, vinyl, polyester fiber and film and a range of alcohol and solvents, involves the extraction of ethane from underground gas fields. The process at the petrochemical plant involves cracking, quenching, compression and distillation. This process is essentially separating heavy hydrocarbons into lighter hydrocarbons through heat. Different hydrocarbons have different boiling points and once the hydrocarbon is separated, it is then cooled down or quenched, which stops the reaction. An example of this is separating ethane into ethylene or propylene. Technology used in this industry has been fairly static over the past 10 years. Most technological developments aim to increase the efficiency of the production process and the manufacturing assets of the participant. In the case of industry participants that are subsidiaries of integrated oil companies, their research and technology centers are often integrated with other components (e.g. oil and gas research). Major operators in the industry such as LyondellBassell Industries develop, manufacture and license out their proprietary chemical catalysts to several end markets. Moreover, industry-used technology tends to be widely available and players hold a limited number of patents and trademarks. For example, at the end of 2012, Dow Chemical Company held 48 industry-related US patents compared with the 3,702 US patents company wide. Thus, as a proportion of total revenue and expenditure, industry-centered R&D activities tend to be somewhat small. A very high level of revenue volatility characterizes the Petrochemical Manufacturing industry. The highly volatile nature of the industry can be seen over the previous five years to 2017, with revenue increasing and decreasing from year to year. This volatility is due in part to demand for petrochemicals being dependent on downstream industries that are cyclical in nature, such as the Plastic and Resin Manufacturing Industry (IBISWorld report 32521)). Aside from being dependent on cyclical industries, the industry’s input costs (crude oil and natural gas) can vary widely from year to year as well. The price of crude oil has been volatile over the five years to 2017. Crude oil prices have increased by as much as 30.6% in 2011, while declining by as much as 47.2% in 2015. Crude oil prices and natural gas prices are largely dependent on supply and demand. While economic issues impact demand, supply tends to be more volatile and can fluctuate based on technological advancements as well geopolitical events. As a result, industry participant’s costs have varied widely over the five years to 2017. Provided to: Concordia University St. Paul (2126004051) | 18 April 2017 Petrochemical Manufacturing in the USJanuary 2017   31 WWW.IBISWORLD.COM Operating Conditions Revenue Volatility continued Over the five years to 2022, the industry is expected to be less volatile relative to the previous five-year period. Economic conditions are expected to stabilize, leading to stable downstream demand. 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* (%) 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. With that said, input costs are expected to remain volatile and unforeseen shocks can stir up volatility in the crude oil and natural gas markets, directly impacting industry participants and their revenue. Hazardous Rollercoaster 100 Petrochemical Manufacturing 10 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 participants are subject to extensive federal, state and local regulations and environmental laws. These regulations govern discharge of materials into the environment, including the emission of air pollutants and the release of water pollutants. Industry participants also are subject to regulations that govern the manufacturing, storage, handling and disposal of hazardous substances and waste and other toxic materials. Regulations that apply to the industry include the Clean Air Act. Air pollution control regulations affect many petrochemical manufacturers and their use of pumps, valves, flanges and storage tanks. New regulations are being developed that will increase the number of facilities affected. The Hazardous Organics National Emission Standard for Hazardous Air Pollutants, or the HON Rule, particularly affects this industry, since it controls the emission of various hazardous air pollutants (HAPs), including butadiene and benzene. The Clean Water Act (CWA) regulates direct and indirect discharges. The CWA is concerned with priority, conventional and non-conventional pollutants. Industry participants that discharge into the nation’s waters require a permit under the National Pollutant Discharge Elimination System (NPDES) program. Alternatively, if companies discharge process wastewater into a city sewer system (i.e. publicly owned treatment works), they must meet pretreatment standards. The Comprehensive Environmental Response, Compensation and Liability Act states that industry participants must pay for the cleanup of hazardous substances if they are found responsible. Petrochemical manufacturers must also abide by the Department of Labor’s Occupational Safety and Health Administration regulations as set out in Title 29 of the Code of Federal Provided to: Concordia University St. Paul (2126004051) | 18 April 2017 Petrochemical Manufacturing in the USJanuary 2017   32 WWW.IBISWORLD.COM Operating Conditions Regulation & Policy continued Regulations. Additionally, they must comply with comparable state statutes that regulate the protection of worker health and safety. Operators in the industry also have to comply with local and federal greenhouse gas (GHG) reduction laws. The Environmental Protection Agency (EPA) oversees the GHG regulations under the Clean Air Act. Furthermore, operators in the industry also have to face testing and assessments for their products from the National Toxicology Program (NTP). The NTP is a federal agency that identifies and selects chemicals and other substances for studies to evaluate potential human health hazards. Furthermore, the industry is already highly regulated, meaning that any further governmental regulations, particularly environmental regulations, will adversely affect its performance. Regulatory requirements for petrochemical manufacturers, such as the Hazardous Organics National Emission Standard for Hazardous Air Pollutants (or the HON Rule), are expected to increase in the future. Industry Assistance This industry receives little in the way of government assistance. Most of the key products produced in this industry are exempt from tariffs, including ethylene, propylene, butylene, butadiene, benzene, cumene and xylene. through meetings and conferences. The association also hosts the International Petrochemical Conference which hosts workshops, guest lectures and other industry relevant networking and panel discussions. The American Petroleum Institute (API) is a national trade association that represents America’s oil and natural gas industry. As stated on its website, its mission is to influence public policy in support of a strong, viable US oil and natural gas industry. Additionally, they provide support, education and certification programs to the operators in the industry through various seminars, workshops and conferences. Level & Trend  he level of T Industry Assistance is L owand the trend is S  teady Industry Associations. Previously the National Petrochemical & Refiners Association, the American Fuel & Petrochemical Manufacturers is a trade association for US suppliers of gasoline, diesel, jet fuel, home heating oil and petrochemicals. The 110-yearold organization works as an advocate for industry operators and provides technological and education support Provided to: Concordia University St. Paul (2126004051) | 18 April 2017 WWW.IBISWORLD.COM Petrochemical Manufacturing in the US January 2017   33 Key Statistics Industry Data 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Sector Rank Economy Rank Revenue ($m) 90,316.1 59,451.9 87,414.2 95,423.1 88,934.9 88,212.3 77,487.0 52,118.5 48,116.1 54,122.5 56,492.1 57,966.1 59,550.1 61,018.4 62,902.8 22/195 201/1546 Annual Change 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Sector Rank Economy Rank Key Ratios 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Sector Rank Economy Rank Revenue (%) -34.2 47.0 9.2 -6.8 -0.8 -12.2 -32.7 -7.7 12.5 4.4 2.6 2.7 2.5 3.1 2/195 47/1546 IVA/Revenue (%) 6.79 8.39 9.42 11.04 10.42 13.32 15.08 17.40 10.69 19.38 19.24 19.13 19.09 19.00 18.95 138/195 1228/1546 Industry Value Added ($m) 6,136.8 4,987.9 8,238.5 10,531.5 9,267.1 11,752.0 11,687.4 9,070.9 5,144.3 10,491.4 10,866.3 11,090.9 11,369.0 11,591.3 11,922.4 30/195 278/1546 Establishments 50 50 53 60 55 62 58 52 49 52 53 55 54 56 56 193/195 1420/1546 Industry Value Added (%) -18.7 65.2 27.8 -12.0 26.8 -0.5 -22.4 -43.3 103.9 3.6 2.1 2.5 2.0 2.9 1/195 1/1546 Establishments (%) 0.0 6.0 13.2 -8.3 12.7 -6.5 -10.3 -5.8 6.1 1.9 3.8 -1.8 3.7 0.0 4/195 130/1546 Imports/ Demand (%) 16.75 12.90 13.77 15.39 14.14 12.37 12.51 9.05 6.43 6.53 6.58 6.63 6.68 6.73 6.78 150/182 416/519 Enterprises Employment 38 9,157 36 9,124 40 8,573 43 8,175 37 8,582 44 8,789 40 9,094 36 9,311 35 8,848 36 9,612 36 9,926 38 10,212 37 10,331 38 10,597 38 10,676 194/195 172/195 1421/1546 1074/1546 Exports ($m) 2,272.5 1,576.2 1,965.7 2,120.9 1,867.7 1,817.4 1,620.9 1,535.0 1,871.4 2,071.2 2,145.4 2,184.7 2,228.4 2,266.7 2,319.5 90/182 123/519 Imports ($m) 17,716.6 8,570.4 13,639.5 16,968.1 14,341.0 12,190.1 10,848.3 5,036.0 3,177.0 3,637.3 3,828.7 3,961.6 4,102.0 4,237.2 4,403.9 96/182 120/519 Wages ($m) 988.7 1,004.6 983.1 966.4 1,049.4 1,048.4 1,031.4 1,076.0 1,008.4 1,115.8 1,159.7 1,195.5 1,216.5 1,250.5 1,269.5 130/195 803/1546 Price of Natural Gas Domestic ($ per thousand Demand cubic feet) 105,760.2 8.0 66,446.1 3.7 99,088.0 4.5 110,270.3 4.0 101,408.2 2.8 98,585.0 3.8 86,714.4 4.5 55,619.5 2.7 49,421.7 2.5 55,688.6 3.1 58,175.4 3.4 59,743.0 3.5 61,423.7 3.6 62,988.9 3.8 64,987.2 3.9 28/182 N/A 37/519 N/A Enterprises Employment (%) (%) -5.3 -0.4 11.1 -6.0 7.5 -4.6 -14.0 5.0 18.9 2.4 -9.1 3.5 -10.0 2.4 -2.8 -5.0 2.9 8.6 0.0 3.3 5.6 2.9 -2.6 1.2 2.7 2.6 0.0 0.7 18/195 2/195 367/1546 75/1546 Exports (%) -30.6 24.7 7.9 -11.9 -2.7 -10.8 -5.3 21.9 10.7 3.6 1.8 2.0 1.7 2.3 6/182 34/519 Imports (%) -51.6 59.1 24.4 -15.5 -15.0 -11.0 -53.6 -36.9 14.5 5.3 3.5 3.5 3.3 3.9 7/182 31/519 Wages (%) 1.6 -2.1 -1.7 8.6 -0.1 -1.6 4.3 -6.3 10.7 3.9 3.1 1.8 2.8 1.5 3/195 60/1546 Domestic Demand (%) -37.2 49.1 11.3 -8.0 -2.8 -12.0 -35.9 -11.1 12.7 4.5 2.7 2.8 2.5 3.2 6/182 21/519 Exports/ Revenue (%) 2.52 2.65 2.25 2.22 2.10 2.06 2.09 2.95 3.89 3.83 3.80 3.77 3.74 3.71 3.69 161/182 451/519 Revenue per Employee ($’000) 9,863.07 6,515.99 10,196.45 11,672.55 10,362.96 10,036.67 8,520.67 5,597.52 5,438.08 5,630.72 5,691.33 5,676.27 5,764.21 5,758.08 5,891.98 2/195 10/1546 Wages/Revenue (%) 1.09 1.69 1.12 1.01 1.18 1.19 1.33 2.06 2.10 2.06 2.05 2.06 2.04 2.05 2.02 194/195 1529/1546 Employees per Est. 183.14 182.48 161.75 136.25 156.04 141.76 156.79 179.06 180.57 184.85 187.28 185.67 191.31 189.23 190.64 14/195 42/1546 Figures are in inflation-adjusted 2017 dollars. Rank refers to 2017 data. Provided to: Concordia University St. Paul (2126004051) | 18 April 2017 Average Wage ($) 107,972.04 110,105.22 114,673.98 118,214.07 122,279.19 119,285.47 113,415.44 115,562.24 113,969.26 116,084.06 116,834.58 117,068.16 117,752.40 118,005.10 118,911.58 4/195 63/1546 Price of Natural Gas (%) -54.0 22.1 -10.7 -29.8 35.5 18.2 -40.4 -5.3 23.6 7.0 2.9 4.1 4.3 4.9 N/A N/A Share of the Economy (%) 0.04 0.03 0.06 0.07 0.06 0.08 0.07 0.06 0.03 0.06 0.06 0.06 0.06 0.06 0.06 30/195 278/1546 SOURCE: WWW.IBISWORLD.COM WWW.IBISWORLD.COM Petrochemical Manufacturing in the US January 2017   Industry Financial Ratios Apr 2012 Mar 2013 Apr 2013 Mar 2014 Apr 2014 Mar 2015 Apr 2015 Mar 2016 Apr 2015 - Mar 2016 by company revenue Small Medium Large ($50m) Liquidity Ratios Current Ratio Quick Ratio Sales / Receivables (Trade Receivables Turnover) Days’ Receivables Cost of Sales / Inventory (Inventory Turnover) Days’ Inventory Cost of Sales / Payables (Payables Turnover) Days’ Payables Sales / Working Capital 1.8 0.9 1.9 1.0 2.2 1.3 2.1 1.2 2.4 1.5 1.9 1.1 2.1 1.3 10.2 9.6 9.4 9.4 8.2 8.2 12.2 35.8 8.8 41.5 15.6 23.4 12.6 38.0 8.2 44.5 13.4 27.2 9.7 38.8 7.6 48.0 13.8 26.4 7.4 38.8 7.8 46.8 14.3 25.5 7.4 44.5 8.2 44.5 14.2 25.7 5.9 44.5 5.3 68.9 11.1 32.9 7.7 29.9 10.2 35.8 19.3 18.9 7.8 4.7 10.0 14.0 12.8 4.7 19.7 13.8 3.4 4.6 5.5 4.6 n/a 5.2 4.5 1.0 1.1 42.7 0.8 1.0 43.6 0.7 0.8 45.5 0.7 0.7 48.1 0.7 0.7 36.5 0.6 1.1 43.1 0.8 0.5 54.8 13.8 6.1 4.8 2.0 24.0 11.4 5.7 2.0 31.7 14.4 5.3 1.9 17.9 9.5 4.5 1.7 12.1 6.5 5.8 1.9 28.2 9.6 9.1 2.1 14.2 9.9 3.7 1.6 18.0 5.9 5.8 0.9 2.0 7.3 24.6 9.2 8.8 2.9 3.9 13.9 25.8 11.7 10.3 4.2 4.6 18.5 25.6 9.6 9.3 2.1 4.0 17.5 43.5 12.2 9.5 1.7 3.2 9.9 30.2 6.4 6.7 1.9 3.4 13.0 19.9 10.5 10.6 2.7 6.7 21.9 7.5 20.0 20.7 2.5 50.6 39.9 4.8 4.8 100.0 20,323.1 9.4 20.0 19.9 2.5 51.9 36.1 6.3 5.8 100.0 17,297.6 11.4 19.9 19.9 2.5 53.7 33.8 6.2 6.2 100.0 20,230.0 11.6 19.0 18.1 2.2 51.0 36.7 6.0 6.3 100.0 18,315.8 16.1 22.0 18.0 1.0 57.1 32.2 2.9 7.8 100.0 232.1 8.4 26.4 25.3 2.5 62.5 25.6 6.6 5.3 100.0 1,868.9 12.3 13.6 13.8 2.5 42.1 44.9 6.5 6.5 100.0 16,214.8 6.4 3.4 11.9 0.4 7.1 29.3 17.3 0.8 5.2 47.5 20,323.1 6.0 3.6 12.3 0.4 6.8 29.2 14.5 0.9 5.5 49.9 17,297.6 6.0 2.6 11.1 0.4 8.3 28.4 14.4 0.8 4.8 51.7 20,230.0 6.1 2.7 10.5 0.2 6.7 26.2 13.5 0.9 5.1 54.1 18,315.8 9.8 3.1 10.4 n/a 9.1 32.5 17.3 0.4 10.5 39.4 232.1 8.3 3.1 15.5 0.5 6.4 33.7 11.1 1.1 4.5 49.7 1,868.9 3.6 2.3 7.6 0.2 6.1 19.8 14.0 1.0 4.0 61.3 16,214.8 351 319 341 315 49 101 165 Coverage Ratios Earnings Before Interest & Taxes (EBIT) / Interest Net Profit + Dep., Depletion, Amort. / Current Maturities LT Debt Leverage Ratios Fixed Assets / Net Worth Debt / Net Worth Tangible Net Worth Operating Ratios Profit before Taxes / Net Worth, % Profit before Taxes / Total Assets, % Sales / Net Fixed Assets Sales / Total Assets (Asset Turnover) Cash Flow & Debt Service Ratios (% of sales) Cash from Trading Cash after Operations Net Cash after Operations Cash after Debt Amortization Debt Service P&I Coverage Interest Coverage (Operating Cash) Assets, % Cash & Equivalents Trade Receivables (net) Inventory All Other Current Assets Total Current Assets Fixed Assets (net) Intangibles (net) All Other Non-Current Assets Total Assets Total Assets ($m) Liabilities, % Notes Payable-Short Term Current Maturities L/T/D Trade Payables Income Taxes Payable All Other Current Liabilities Total Current Liabilities Long Term Debt Deferred Taxes All Other Non-Current Liabilities Net Worth Total Liabilities & Net Worth ($m) Maximum Number of Statements Used 34 Source: RMA Annual Statement Studies, rmahq.org. RMA data for all industries is derived directly from more than 260,000 statements of member financial institutions’ borrowers and prospects. Note: For a full description of the ratios refer to the Key Statistics chapter online. Provided to: Concordia University St. Paul (2126004051) | 18 April 2017 Petrochemical Manufacturing in the USJanuary 2017   35 WWW.IBISWORLD.COM Jargon & Glossary Industry Jargon ETHYLENEA gaseous organic compound used in chemical reactions to make other chemicals. It is used in polymerization, oxidation and halogenation. PROPYLENEAn unsaturated organic compound used in the production of polypropylene, a versatile polymer used in packaging and other plastic products. HAZARDOUS AIR POLLUTANTS (HAPS)Hazardous air pollutants are known or suspected carcinogens. PETROCHEMICALA chemical product derived from petroleum, but that can also be obtained from other fossil fuels like coal or natural gas. 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 IBISWorld’s 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. 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 industry’s 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 industry’s 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 industry’s 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 company’s profitability. It is calculated as revenue minus expenses, excluding interest and tax. Provided to: Concordia University St. Paul (2126004051) | 18 April 2017 Petrochemical Manufacturing in the USJanuary 2017   36 WWW.IBISWORLD.COM 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. Provided to: Concordia University St. Paul (2126004051) | 18 April 2017 www.ibisworld.com | 1-800-330-3772 | info @ibisworld.com At IBISWorld we know that industry intelligence is more than assembling facts It is combining data with analysis to answer the questions that successful businesses ask Identify high growth, emerging & shrinking markets Arm yourself with the latest industry intelligence Assess competitive threats from existing & new entrants Benchmark your performance against the competition Make speedy market-ready, profit-maximizing decisions Who is IBISWorld? We are strategists, analysts, researchers, and marketers. We provide answers to information-hungry, time-poor businesses. Our goal is to provide real world answers that matter to your business in our 700 US industry reports. When tough strategic, budget, sales and marketing decisions need to be made, our suite of Industry and Risk intelligence products give you deeply-researched answers quickly. 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