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Petrochemical Manufacturing in the USJanuary 2017 1
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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
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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
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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
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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:
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SOURCE:
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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
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Medium
Petrochemical Manufacturing in the USJanuary 2017 4
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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
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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
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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
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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
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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
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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.
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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
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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.
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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
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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
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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
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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
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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
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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
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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
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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.
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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
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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
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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
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