IBISWorld Industry Report 32612 Plastic Pipe & Parts ...

WWW.IBISWORLD.COM Plastic Pipe & Parts Manufacturing in the US October 2019 1

IBISWorld Industry Report 32612Plastic Pipe & Parts Manufacturing in the USOctober 2019 Ryan Roth

Pipe dream: Steady demand from construction and automobile industries is expected to raise revenue

2 About this Industry2 Industry Definition

2 Main Activities

2 Similar Industries

2 Additional Resources

3 Industry at a Glance

4 Industry Performance4 Executive Summary

4 Key External Drivers

6 Current Performance

9 Industry Outlook

11 Industry Life Cycle

13 Products and Markets13 Supply Chain

13 Products and Services

15 Demand Determinants

16 Major Markets

18 International Trade

20 Business Locations

22 Competitive Landscape22 Market Share Concentration

22 Key Success Factors

23 Cost Structure Benchmarks

25 Basis of Competition

25 Barriers to Entry

26 Industry Globalization

27 Major Companies27 JM Eagle Inc.

28 Advanced Drainage Systems Inc.

29 Westlake Chemical Corporation

30 Operating Conditions30 Capital Intensity

31 Technology and Systems

32 Revenue Volatility

33 Regulation and Policy

33 Industry Assistance

35 Key Statistics35 Industry Data

35 Annual Change

35 Key Ratios

36 Industry Financial Ratios

37 Jargon & Glossary

www.ibisworld.com | 1-800-330-3772 | [email protected]


This industry manufactures a range of plastic pipes, plastic fittings for plastic pipes and unlaminated plastic profile shapes, such

as rods, tubes, plates and car parts. It does not include plastic hose fixtures, plastic plumbing fixtures or plastic packaging.

The primary activities of this industry are

Nonrigid plastic sausage casings manufacturing

Nonrigid plastic profile shapes (e.g. rods and tubes) manufacturing

Rigid plastic pipefittings and unions manufacturing

Rigid plastic pipe manufacturing

PVC pipe manufacturing

Laminated plastic profile shapes (e.g. plates, rods and sheets) manufacturing

32611 Plastic Film, Sheet & Bag Manufacturing in the USEstablishments primarily engage in the manufacturing of plastic film, unlaminated plastic sheets and plastic bags.

32619 Plastic Products Miscellaneous Manufacturing in the USEstablishments primarily engage in the manufacturing of plastic plumbing fixtures.

32622 Hose & Belt Manufacturing in the USEstablishments primarily engage in the manufacturing of plastic hoses.

33593 Wiring Device Manufacturing in the USEstablishments primarily engage in the manufacturing of noncurrent-carrying plastic conduit.

Industry Definition

Main Activities

Similar Industries

Additional Resources

About this Industry

For additional information on this industry

www.ppfahome.org Plastic Pipe and Fittings Association

www.plasticsnews.com Plastics News

www.plasticpipe.org Plastics Pipe Institute

The major products and services in this industry are

Drain, waste and vent (DWV) pipes

Oil and gas pipes

Pipe fittings and unions

Pipes for industrial and mining applications

Pipes for pressurized water applications

Unlaminated plastic profile extrusions and shapes

Sewer, storm drain and other nonpressurized water pipes

Other


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Value of construction

SOURCE: WWW.IBISWORLD.COM

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Revenue vs. employment growth

Products and services segmentation (2019)

44.7%Unlaminated plastic

profile extrusionsand shapes

6.2%Sewer, storm drain and othernonpressurized water pipes

12.2%Drain, waste and vent (DWV) pipes

4.2%Pipes for industrial

and mining applications

3.8%Oil and gas pipes

12.0%Other

9.4%Pipe fittings and unions

7.5%Pipes for pressurizedwater applications

Key Statistics Snapshot

Industry at a GlancePlastic Pipe & Parts Manufacturing in 2019

Industry Structure Life Cycle Stage Mature

Revenue Volatility Medium

Capital Intensity Medium

Industry Assistance Medium

Concentration Level Low

Regulation Level Medium

Technology Change Medium

Barriers to Entry Medium

Industry Globalization Medium

Competition Level High

Revenue

$21.4bnProfit

$1.5bnExports

$2.2bnBusinesses

621

Annual Growth 19–24

1.4%Annual Growth 14–19

1.6%

Key External DriversValue of constructionPrice of plastic materials and resinDemand from car and automobile manufacturingTrade-weighted indexDemand from water supply and irrigation systems

Market ShareJM Eagle Inc. 13.8%

Advanced Drainage Systems Inc. 5.3%

p. 27

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FOR ADDITIONAL STATISTICS AND TIME SERIES SEE THE APPENDIX ON PAGE 35



Key External Drivers Value of constructionThe Construction sector (IBISWorld report 23) is the industry’s primary downstream market. Plastic pipes, hoses and fittings are used in residential, commercial, industrial and public works construction projects. An increase in the level of construction activity causes demand for these products to rise. Population growth, government

expenditure on infrastructure projects and low interest rates stimulate construction activity. The value of construction is expected to increase in 2019, representing a potential opportunity for the industry.

Price of plastic materials and resinThe price of plastic materials and resin shifts in response to global demand and

Executive Summary Over the five years to 2019, the Plastic Pipe and Parts Manufacturing industry has performed well as a result of broad economic improvements in the United States. This industry offers a wide-range of plastic pipes and profiling shapes, such as tubes, rods and car components. Plastic pipes, especially polyvinyl chloride (PVC) pipes, are used to construct new homes, while other plastic profile shapes, such as plastic rods and tubes, are used in automobile production. New changes in the manufacturing of plastic pipes have enabled them to handle

higher pressures and temperatures, expanding their use in industrial manufacturing, oil and gas and pressurized water supply applications.

Construction activity boosted demand for industry products from a variety of downstream markets, as plastic pipes and parts are used as key components in construction activities. Specifically, the residential construction market’s explosive growth has boosted demand for plastic water pipes, fittings and unions. Furthermore, growth in heavy manufacturing industries has helped demand for unlaminated plastic rods,

tubes and other plastic components. Overall, industry revenue is expected to increase at an annualized rate of 1.6% to reach $21.4 billion over the five years to 2019, including an increase of 0.9% in 2019 alone. However, industry profit, measured as earnings before interest and taxes, is expected to remain at a 7.1% share of industry revenue amid slowing demand for industry services.

Over the five years to 2024, subdued growth in construction activity is expected to limit revenue growth for manufacturers of plastic pipes and parts. However, improvements in plastics technology have made plastic pipes more attractive to markets that have historically relied on pipes made from metal or concrete, including the oil and gas transmission and water supply markets. These trends are expected to continue to drive demand for plastic pipes and similar products, increasing industry performance and overall profitability. Due to an expected depreciation of the dollar, import competition is not expected to increase drastically over the next five years, with imports continuing to capture a relatively small share of domestic demand. This comes as a sign of relief for domestic industry operators. Overall, IBISWorld forecasts revenue to grow at an annualized rate of 1.4% to reach $22.9 billion over the five years to 2024.

Industry PerformanceExecutive Summary | Key External Drivers | Current Performance Industry Outlook | Life Cycle Stage

Construction activity boosted demand for industry products from a variety of downstream markets


Industry Performance

Key External Driverscontinued

supply trends. Increases in the price of plastics can lead to greater returns for manufacturers but can also make purchases of resins more costly to process. When the price of plastic materials changes rapidly, industry operators are often unable to pass on increasing costs to customers, dampening profit. Generally, an increase in input prices benefits the industry, as it indicates increasing downstream demand. The price of plastic materials and resin is projected to decrease in 2019.

Demand from car and automobile manufacturingThe automotive industry uses plastic profiles for interior trim and includes plastic piping and parts as components and connectors in the automobile. Growth in automotive activity will result in increased demand for these products. As population and disposable income grow, demand for automobile manufacturing will increase. Demand from car and automobile manufacturing is expected to increase slightly in 2019.

Trade-weighted indexWhen the US dollar appreciates, imported plastics become relatively less expensive in domestic markets, gaining price advantages over domestic products. Conversely, when the US dollar depreciates, imported plastics become more expensive and domestic products become more attractive. The industry contends with growing competition from imports, particularly those from China. The trade-weighted index is expected to increase in 2019, posing a potential threat to the industry.

Demand from water supply and irrigation systemsPlastic pipes, tubing and fittings are used to transport water to households and remove sewage. An increase in demand for water supply, sewerage and drainage services causes demand for these products to rise. As the population grows, demand for these services will increase. Demand from water supply and irrigation systems is expected to increase in 2019.

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Current Performance

The Plastic Pipe and Parts Manufacturing industry has grown over the five years to 2019 as a result of increased demand from downstream markets. The industry primarily manufactures plastic pipe and parts that are created by heating up resins and placing them into an extrusion machine. Industry products are normally found in automobiles, in addition to residential and nonresidential buildings. Plastic pipes, especially polyvinyl chloride (PVC) pipes, are used to construct new homes, and are increasingly replacing pipes made from other materials, including copper and steel. During the period, activity in the construction and manufacturing industries increased due to steady economic growth in the United States. Growth in the Construction sector (IBISWorld report 23) increased demand for industry products, as plastic pipes and parts are main components used in the construction of residential homes and nonresidential buildings. The manufacturing sector also uses plastic pipes and unlaminated plastic parts for components in products such as automobiles. Accordingly, industry revenue is directly correlated with

fluctuations in the construction and automotive markets. Increased demand for industry products from the Construction sector is expected to lead the industry to increase at an annualized rate of 1.6% to $21.4 billion over the five years to 2019. Revenue is forecast to rise 0.9% in 2019 alone, as sustained demand for PVC and high-density polyethylene pipes continues to drive the industry forward. However, industry revenue is expected to be hindered by declining car and automobile manufacturing activity during the period.

Major markets The primary markets for the industry are industrial manufacturers and construction markets. In particular, one portion of the industrial manufacturing sector that uses industry products is car and automobile manufacturing (report 33611a). Plastic pipes and parts are important components used in the final production of automobiles, especially plastic profile shapes. During the period, automobile manufacturers benefited from consumers having more readily available financing options. As a result of the Federal Reserve keeping interest rates lower than their historical average, consumers had the ability to secure

attractive financing options, and purchased new cars. Furthermore, per capita disposable income increased an annualized 2.2% over the five years to 2019. As a result of this, consumers felt confident in their financial futures and ability to finance large-item purchases. Still, new car sales declined slightly during the period, in addition to car and automobile manufacturing. As a result, revenue generated from this market declined over the five years to 2019, limiting industry performance.

As previously mentioned, interest rates remained below their historic average during the period. This benefited the

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Innovation of plastics Over the years, plastic has become an increasingly popular substitute for materials such as metal and concrete. This popularity has arisen from technological developments. Plastic is low-cost, lightweight, noncorrosive and easier to install than most substitute materials. However, technological advances have only recently enabled plastic pipes to handle higher pressures and temperatures, expanding their use in industrial manufacturing, oil and gas operations and pressurized water supply applications. This rise in popularity was a key contributing factor for the industry’s strong rebound from recessionary lows prior to the period, and its relatively resilient performance in recent years, despite somewhat challenging operating conditions.

For instance, during the period, the price of plastic materials and resin, the main inputs used in the production of plastic pipe and parts, also had an effect

on industry revenue growth. In 2015 and 2016, the price of plastic materials and resin declined sharply as a result of falling oil prices. This trend placed downward pressure on industry prices; as input costs decline, manufacturers were forced to reduce prices to remain competitive. Industry revenue grew due to increased demand from downstream markets, but declining input prices caused manufacturers to maintain lower prices. Despite the negative pressure, industry profit, measured as earnings before interest and taxes, is expected to have remained at a 7.1% share of industry revenue over the five years to 2019.

International trade A stronger US dollar, as exemplified by a rising trade-weighted index, made foreign products more attractive and benefited imports over the past five years. As the value of the dollar increases, the purchasing power of importers of foreign plastic pipes and parts increases as well. An appreciating US dollar led imports to

rise at an annualized rate of 6.2% to $1.4 billion over the five years to 2019. By contrast, exports have increased at an annualized rate of just 0.5% to $2.2 billion during the same period. Overall, exports are expected to account for a 10.3% share of industry revenue in 2019, down from 10.9% in 2014.

Plastic has become an increasingly popular substitute for materials such as metal and concrete

construction industry by reducing borrowing costs and enabling construction operators to lock in accommodative borrowing agreements. This accelerating downstream construction activity led to more new projects. In particular, residential construction activity increased as a result of consumers being able to obtain

mortgages at a more competitive rate, due to lower interest rates. Accordingly, the value of residential construction increased at an annualized rate of 3.5% over the five years to 2019. As a result of increased activity in residential construction markets, demand for plastic pipes and parts increased in line with sector-wide growth.

Major markets continued



Industry structure Despite revenue growth and consistent profitability over the five years to 2019, industry participation has declined steadily due to increased consolidation activity. For example, major company Advanced Drainage Systems Inc. acquired three separate companies to expand its storm drain and sewer pipe production over the past few years. Other companies, including Westlake Chemical Corporation, have also acquired smaller pipe manufacturers to expand their market shares. Overall, the number of industry enterprises is expected to decline at an annualized rate of 0.7% to 621 over the five years to 2019. Despite a drop in the number of

operators, industry employment has increased at an annualized rate of 2.5%, to reach 45,497 workers over the five years to 2019. As operators consolidate operations, the workload for each employee increases. To fill an increase in demand for industry products, operators expanded their employee count to meet the level of demand for plastic pipes and parts.

Operators expanded their employee count to meet the level of demand for plastic pipes and parts



Industry Outlook

The Plastic Pipe and Parts Manufacturing industry is expected to continue to grow over the five years to 2024 as a result of rising demand from key downstream markets. However, industry performance is likely to be more subdued as economic growth decelerates and demand from construction markets returns to sources of organic growth. However, interest rates are expected to remain relatively low over the five years to 2024, keeping financing opportunities attractive for both consumers and businesses. As the cost of borrowing remains low, consumers will feel more

incentivized to invest in new items. Accordingly, demand for cars, residential housing and nonresidential projects are expected to remain relatively stable as consumers and businesses attempt to secure favorable borrowing agreements. However, as interest rates reach normalized levels over the five years to 2024, construction activity is expected to slow, which in turn is expected to lead to slower demand for plastic pipes and parts. Overall, revenue is expected to increase at an annualized rate of 1.4% to $22.9 billion over the five years to 2024.

Key markets While construction activity is expected to increase over the five years to 2024, the value of residential construction, specifically, is expected to decelerate compared with the past five years. Domestic economic conditions are expected to continue improving, benefiting both businesses and households. The value of construction, which is an estimate of the total dollar value of both public and private construction, is expected to increase at an annualized rate of 1.4% over the five years to 2024. As construction activity increases, demand for industry products is expected to increase as well, due to construction industries using plastic pipes and parts in their production.

In particular, residential construction is directly affected by the interest rates at which consumers can borrow funds. Over the five years to 2024, broad economic uncertainty is expected to result in a US economic slowdown, particularly looming fears of a trade war with China. Accordingly, the Federal Reserve (the Fed) is expected to maintain low interest rates to stimulate economic activity, as

inflation has failed to materialize in 2019. As a result, the value of residential construction is only expected to increase at an annualized rate of 0.6% over the five years to 2024, which is significantly slower than its 3.5% annualized growth during the previous five-year period. As demand for homes slows over the five years to 2024, residential construction operators’ demand for industry products will similarly slow. Similarly, new car sales are expected to increase slowly at an annualized rate of 0.5% over the five years to 2024. As with purchasing a new home, buying a car requires financing that is dependent upon interest rates and overall economic conditions. Uncertain economic conditions are expected to lead to relatively slow demand for industry products from auto manufacturers during the outlook period.

As construction activity increases, demand for industry products is expected to increase as well



Industry structure The industry is expected to continue to be active in the research and development of products that can be used as substitutes for more-expensive metal or concrete materials, and will remain an important measure for operators over the five years to 2024. New and advanced plastics are expected to continue to give the industry the opportunity to further penetrate what have traditionally been metal-dominated markets, such as automobile component manufacturing and oil and gas transmission. However, the industry is expected to remain vulnerable to volatility in the price of crude oil and petroleum byproducts. The rate at which the economy and the industry adapt to highly volatile oil prices is expected to play an important role in determining the profitability and demand for industry products. High oil prices increase the price of plastic resin, which is generally passed on to end users of plastic pipes. However, passing higher purchase costs down to customers negatively affects demand for industry products. Furthermore, high oil prices reduce demand for new automobiles, diminishing demand for plastic profile shapes. Industry operators need to adapt their pricing systems to respond more effectively to fluctuating resin prices. Over the five years to 2024, crude oil prices are expected to remain highly volatile, limiting the industry’s ability to internalize costs effectively. Nonetheless, profit is expected to remain relatively high, as the price of plastic materials and resin is expected to decline. As a result, industry profit,

measured as earnings before interest and taxes, is expected to increase from a 7.1% share of revenue in 2019 to a 7.6% share of industry revenue in 2024.

Imports are expected to grow at an annualized rate of 2.8% to $1.6 billion over the five years to 2024, while exports are expected to increase at an annualized rate of 1.5% to $2.4 billion during the period. In 2019, imports are expected to capture 6.8% of domestic demand, while exports are expected to generate 10.3% of industry revenue. As the value of the US dollar depreciates, domestic plastic pipes and products become more competitive in the global market. Over the five years to 2024, the trade-weighted index is expected to decline at an annualized rate of 0.8%, signaling a decline in the value of the US dollar.

With downstream construction markets expected to stabilize, merger and acquisition activity is expected to continue over the next five years. However, this will not stop new entrants from entering the industry. Over the five years to 2024, the number of enterprises is anticipated to increase an annualized 0.2% to 626 companies. Industry employment is also estimated to increase alongside revenue growth at an annualized rate of 1.3% to 48,481 workers during the same five-year period.

Industry operators need to adapt their pricing systems to respond to fluctuating resin prices


Industry PerformanceIndustry value added will grow faster than US GDP over the 10 years to 2024

Consolidation is occurring within the industry

The industry’s products and key markets are well-defined

Life Cycle Stage



Industry Life Cycle The Plastic Pipe and Parts Manufacturing industry is in the mature stage of its economic life cycle, due to a moderate rate of technology change, steady consolidation and well-defined product and market segments. Over the 10 years to 2024, industry value added (IVA), which measures an industry’s contribution to the US economy, is projected to increase at an annualized rate of 2.1%, in line with the overall economy, which is expected to grow an annualized 2.1% during the same period.

Over the five years to 2019, several mergers and acquisitions have completely changed the landscape of the major players in the industry. In an effort to remain competitive in this mature industry, manufacturers consolidate operations to benefit from economies of

scale; thus, per unit production prices decrease as the size of manufacturing operations and infrastructure increase. With the increasingly variable cost of plastic resin, players have been forced to scramble for market share to ensure that they maintain profitability despite changing external factors. Accordingly, the number of enterprises is expected to decline at an annualized rate of 0.3% to 626 over the 10 years to 2024. Although the industry is constantly innovating its existing products, its core products and markets have been established. The industry’s current focus is winning market share from competing products. This lull in groundbreaking innovation is indicative of a mature industry; the industry is no longer fighting to establish itself and is simply focused on improving existing products.

This industry is Mature


Products and Services

IBISWorld estimates that plastic pipes and associated pipe fittings account for 48.3% of revenue for the Plastic Pipe and

Parts Manufacturing industry in 2019, with the remainder coming from sales of miscellaneous profile shape products

Products & MarketsSupply Chain | Products and Services | Demand Determinants Major Markets | International Trade | Business Locations

KEY BUYING INDUSTRIES

11 Agriculture, Forestry, Fishing and Hunting in the US The agriculture and farming sector demands plastic pipes for irrigation and water drainage.

21 Mining in the US Mining companies demand plastic pipes for the drainage of slurry and underground water.

23 Construction in the US Construction companies demand plastic pipe for plumbing, sewage, heating and air-conditioning applications.

23711 Water & Sewer Line Construction in the US Plastic pipe is heavily used in the construction of pipelines that move water and sewage.

23712 Oil & Gas Pipeline Construction in the US Oil and gas pipeline constructors use plastic pipes in some applications for the transport of oil and gas.

23822a Heating & Air-Conditioning Contractors in the US Plastic pipe is used for plumbing, heating and air-conditioning applications.

23822b Plumbers in the US The Plumbing industry demands plastic pipe for plumbing and sewage.

33611a Car & Automobile Manufacturing in the US Automobile manufacturers demand laminated plastic profile shapes for interior trim.

KEY SELLING INDUSTRIES

32521 Plastic & Resin Manufacturing in the US Plastic and resin manufacturers supply polyethylene and polyvinyl chloride (PVC) to pipe manufacturers, which is used in the production of plastic pipes and shapes.

42383 Industrial Machinery & Equipment Wholesaling in the US Industrial machinery and equipment is used in the manufacture of plastic pipes and shapes.

Supply Chain

Products and services segmentation (2019)

Total $21.4bn

44.7%Unlaminated plastic

profile extrusionsand shapes

6.2%Sewer, storm drain and othernonpressurized water pipes

12.2%Drain, waste and vent (DWV) pipes

4.2%Pipes for industrial and

mining applications

3.8%Oil and

gas pipes

12.0%Other

9.4%Pipe fittings and unions

7.5%Pipes for pressurized water applications



Products & Markets

Products and Servicescontinued

made from plastic. Pipe manufacturers have shifted production toward the use of plastic and have invested considerable resources in developing new design features and improvements in material. The low cost and versatility of applications for plastic pipes have enabled these products to capture a growing share of the piping market. According to the Plastic Pipe Institute, plastic pipes systems require significantly less energy to fabricate, transport and install than metal or concrete alternatives. Within the plastic pipes segment, pipes made from high-density polyethylene (HDPE) are generally more versatile and less expensive to produce than pipes made from polyvinyl chloride (PVC or vinyl) and other similar plastics. However, plastic pipes made from PVC and related vinyl materials continue to account for a significant share of the domestic market.

Unlaminated plastic profile shapesUnlaminated plastic profile shapes are expected to account for 44.7% of the Plastic Pipe and Parts Manufacturing industry’s revenue in 2019. Unlaminated plastic profile shapes account for the largest product segment of the industry’s revenue, as many industries continue to use plastic as a durable substitute for other materials such as metal goods. Key product groups within this segment include plastic rods and other extruded tubular shapes, flat sheets and plastic channels. Key markets for these products include household product, residential building material and automotive manufacturing. Industries such as car and automobile manufacturing are increasingly substituting plastic goods, such as plastic profile shapes, into cars to make the vehicles lighter and more fuel-efficient. Still, the segment has decreased as a share of industry revenue over the five years to 2019 because of relatively stronger growth in other

product segments, such as plastic water pipes and plastic pipe fittings and unions.

Plastic pipes used in water applicationsPlastic water pipes are generally segmented according to whether they are designed for use in pressure or non-pressure applications. Pressure applications include tap water transmission and internal hot and cold water distribution. Nonpressure applications include building drain, waste and vent (DWV) systems, sewage and storm water systems. Within the nonpressurized segment, shipments of DWV pipe is expected to account for 12.2% of industry revenue, while sewer, storm drain and water main pipes are expected to account for a 6.2% share. Plastic pipes used in pressurized water applications account for an additional 7.5%.

These products are used across a wide range of applications due to advantages that plastic pipes offer over clay, metal or cement pipes. Plastic water pipes are increasingly being used in downstream construction markets because their noncorrosive trait is particularly important in water distribution. PVC pipes, for example, are widely used in construction because they are relatively inexpensive compared with other materials, more durable, and easier to assemble. In the United States, PVC pipes account for the vast majority of pipe materials used in wastewater mains, though pipes made from HDPE are steadily growing in popularity. Demand for this segment is expected to increase in the coming five years as municipalities continue to replace dated sewer infrastructure with industry products.

Plastic pipe fittings and unionsThis segment is expected to account for 9.4% of sales in 2019. As plastic pipes become an increasingly popular substitute for other pipes, the popularity of plastic pipe fittings and unions also


Products & Markets

Demand Determinants

ConstructionA wide range of plastic pipes and parts are involved in construction, so demand in the Plastic Pipe and Parts Manufacturing industry is determined primarily by the performance of a small number of key construction markets, such as nonresidential and utilities construction (primarily water sanitation). Overall levels of construction are largely influenced by general trends of economic activity, changes in industry cost structures, and new products associated with technological advances (e.g. broadband telecommunications and underground cable). In turn, the rate of population growth and household formation affects the economy’s need for water and sewer infrastructure. As the number of people and families grow, the existing infrastructure is strained by increasing water delivery and sewage removal demands. Depending on the age and condition of existing major pipe systems, the maintenance and replacement decisions made by organizations responsible for those public utilities help determine the level of demand for plastic piping products. If communities choose to invest resources in the replacement or expansion of their existing water and sewage systems, it increases demand for plastic piping.

In public and private construction, the state of the economy influences whether individuals, companies or government entities have the capital available to invest in construction. Increased levels of construction activity necessitate increased spending on piping for use inside new structures and providing water to and removing sewage from these new buildings. Changes in the cost structure of the construction and utility industries influences construction demand by determining the profitability or financial feasibility of projects, either increasing or decreasing demand for plastic piping depending on the severity and direction of changes in cost. Improvements in technology, such as the expansion of fiber-based communications systems, tend to increase the need for plastic piping since communication cables are typically placed inside plastic piping for an increased layer of protection.

IndustrialThe performance of downstream agricultural, mining and oil and gas markets affect demand for pipes used for irrigation and the transfer of water, other liquids, slurry and gases. Large polyethylene bore pipes are used in the mining industry for slurry and water reticulation and an assortment of plastic

Products and Servicescontinued

grows. Pipe fittings and unions are used to hold pipes together, and the growing popularity of plastic piping systems has gradually shifted demand from metal pipe fittings to plastic alternatives. Since this segment’s products complement plastic water pipes, demand for this segment trends with overall changes in demand for plastic water pipes.

OtherDemand for plastic pipes used in other applications has exhibited volatility over

the five years to 2019, due to cyclical demand from key manufacturing and energy markets. In particular, plastic pipes are vital components in several mining, heavy industrial manufacturing, energy and food production sectors. Plastic oil and gas pipes are expected to account for 3.8% industry revenue, while industrial and mining pipes are expected to account for 4.2% of revenue. Other plastic pipes and shapes are anticipated to account for the remaining 12.0% of revenue.


Products & Markets

Major Markets

The Plastic Pipe and Parts Manufacturing industry is driven primarily by a few major sectors that provide the industry with the bulk of its business. These major markets include the residential and nonresidential construction markets, the waterworks (water infrastructure) market and the heavy industrial and general manufacturing sector.

Commercial and infrastructure constructionThe largest market segment is the nonresidential and utilities construction markets, which account for a combined 28.8% of industry revenue in 2019. This segment consists of large public works and telecommunications projects, which represent an estimated 12.2% of industry

Demand Determinantscontinued

piping products are used in agriculture. The industrial and agricultural markets have experienced sharp downturns in recent years, placing significant downward pressure on demand for plastic pipes and related products from these markets.

Household demand for goodsHousehold consumption expenditure on home improvement and high-value consumer goods, such as refrigerators and automobiles also contribute to industry demand. An increase in demand for refrigerators and automobiles increases demand for pipes and other plastic parts used in the manufacture of

these products. Furthermore, greater expenditure on home improvement and tends to increase the levels of renovation of existing pipe systems.

Environmental and health concernsIncreased levels of environmental and health concerns tend to benefit the industry. Plastic is a sanitary alternative to alternative cast iron, stainless steel and clay pipes that degrade over time and contaminate the water they are transporting. Plastic is also lightweight and can improve the fuel efficiency of automobiles, a growing concern in an increasingly environmentally conscious society.

Major market segmentation (2019)

Total $21.4bn

28.1%General manufacturing

9.3%Industrial and energy

17.3%Residential construction

6.2%Other

16.6%Nonresidentialconstruction

12.2%Utilities construction

10.3%Exports



Products & Markets

Major Marketscontinued

revenue, and commercial building activity, which accounts for the remaining 16.6% share. Over the past three decades, utility providers have shifted to the wide-scale use of plastic piping, instead of metal, clay or concrete pipes, to meet their water transportation and sewage removal needs. Meanwhile, the telecommunications sector (e.g. telephone, cable TV, internet and fiber optics infrastructure providers) uses plastic pipes as conduit to shield communication cables from the environment. Demand from the waterworks and telecommunications markets has grown over the past three years, helping boost this segment’s share of the industry.

Residential constructionThe residential construction market is expected to account for 17.3% of industry revenue in 2019. This segment uses plastic pipes for a range of applications, including tubing and electrical purposes. Plastic piping is attractive in the residential market due to its durability and cost efficiency. PVC pipes can last for more than 60 years due to their noncorrosive nature and require very little maintenance, while HDPE pipes have been shown to last over 100 years, according to industry trade organization Plastic Pipe Institute. The value of residential construction and housing start activity has increased significantly over the five years to 2019, significantly boosting this market’s share of industry revenue.

Industrial and manufacturingThe industrial and energy market is expected to account for 9.3% of industry revenue in 2019, with general manufacturing accounting for 28.1%. The industrial, energy and general manufacturing sectors use plastic pipes and shapes as intermediary inputs in the production of their own products. The oil, gas and mining markets also purchase plastic pipes for use in nonpressurized applications. Automotive manufacturers account for the largest share within this segment. These companies typically use laminated plastic profile shapes for interior door trim. Additionally, with the increased emphasis on fuel efficiency in vehicles, automotive manufacturers have started phasing in the use of plastic piping and parts where heavier metal products were previously used.

ExportsExports are expected to account for 10.3% of industry revenue in 2019. Exports benefit primarily from the North American Free Trade Agreement, which grants tariff-free trade with Mexico and Canada. These countries are top export destinations for plastic pipe and parts manufacturers, with Canada accounting for an estimated 33.8% of US exports and Mexico accounting for 24.7%. Over the five years to 2019, exports have been hampered by an appreciating US dollar, which limited the purchasing power of foreign importers of plastic pipes and parts.


Products & Markets

International Trade The Plastic Pipe and Parts Manufacturing industry has experienced a growing trade deficit over the five years to 2019. Some domestic manufacturers have been able to compete with foreign manufacturers by investing in research and development and creating high-quality products. Meanwhile, imports have satisfied domestic demand with low-cost products, particularly within the pipe fittings, unions and unlaminated plastic profile shapes product segments. Over the five years to 2019, imports performed better than exports as domestic economic conditions and an appreciation of the dollar generated strong demand for imported products.

ImportsImports are expected to grow at an annualized rate of 6.2% to $1.4 billion over the five years to 2019. Import growth was primarily driven by low-cost imports from China and Mexico, which currently account for a respective 10.3%

and 18.4% of imports. These countries benefit from lower labor costs and looser labor regulations than the United States. However, the largest source of imported plastic pipe products over the five years to 2019 has been Canada, which is expected to represent 34.3% of imports in 2019. Plastic pipe products, particularly corrugated drain pipes and

Level & Trend Exports in the industry are Medium and Steady

Imports in the industry are Medium and Increasing

$ bi

llion

3

-2

-1

0

1

2

2511 13 15 17 19 21 23Year

Exports Imports Balance

Industry trade balance


Imports From ...

Total $1.4bn

6.0%Germany

10.3%China

18.4%Mexico

31.0%Other

34.3%Canada

Exports To ...

Total $2.2bn

34.1%Other

33.8%Canada

24.7%Mexico

4.0%United

Kingdom

3.4%China

Year: 2019SIZE OF CHARTS DOES NOT REPRESENT ACTUAL DATA SOURCE: USITC


Products & Markets

International Tradecontinued

other large parts are heavy, cumbersome products that are typically difficult to transport over long distances. Therefore, Canada’s close proximity to the United States makes it a key trading partner for industry products. In addition, the appreciation of the US dollar over the five years to 2019 has also boosted imports from Canada.

ExportsOver the five years to 2019, industry exports are expected to increase at an annualized rate of 0.5% to $2.2 billion. The majority of the industry’s exports are purchased by Canada and Mexico, which are expected to account for 33.8% and

24.7% of exports, respectively, in 2019. Their dominance within the export market is due to their geographic proximity to the United States, since the large nature of finished plastic pipe products makes them cost-prohibitive to transport long distances. Despite this challenge, other countries have become a major destination of exports over the past five years. For example, exports to China currently account for 3.4% of volume. Overall, exports have declined as a share of revenue because of stronger recovery in the domestic construction market and appreciation of the US dollar, which has made US-manufactured plastic pipes less competitive in the global market.


Products & Markets

Business Locations 2019

MO1.4

West

West

West

Rocky Mountains Plains

Southwest

Southeast

New England

VT0.1

MA1.6

RI0.2

NJ2.0

DE0.4

NH0.8

CT1.2

MD0.5

DC0.0

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5

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7

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AZ1.9

CA9.2

NV0.6

OR1.4

WA2.9

MT0.4

NE1.2

MN3.0

IA2.5

OH7.2 VA

1.3

FL4.4

KS1.8

CO1.2

UT1.0

ID0.7

TX8.1

OK1.8

NC3.5

AK0.2

WY0.1

TN3.0

KY1.6

GA3.0

IL4.1

ME0.5

ND0.5

WI3.2 MI

3.6 PA4.4

WV0.6

SD0.7

NM0.2

AR1.1

MS0.8

AL1.6

SC1.6

LA1.9

HI0.0

IN2.7

NY2.6 5

67

8

321

4

9


Mid- Atlantic

Establishments (%)

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

Great Lakes


Products & Markets

Business Locations The Plastic Pipe and Parts Manufacturing industry is primarily concentrated in areas where population density and manufacturing activity are high. Industry operators locate themselves near downstream users of industry products to reduce transportation cost and speed up delivery. Consequently, the Southeast (24.2% of locations) and Great Lakes (20.7%) regions account for the largest percentages of industry establishments.

SoutheastThe Southeast region accounts for an estimated 24.2% of industry establishments. This is the most populous region in the United States. The high percentage of establishments in this region indicates manufacturers desire to be near their customer base and lower transportation costs. Additionally, this region is home to several oil refineries and resin manufacturers, which lowers transport costs for raw material.

Great LakesThe Great Lakes region accounts for an estimated 20.7% of industry establishments. This region is a manufacturing hub in the United States and has good transportation linkages.

The major auto manufacturers that are buyers of pipe and plastic parts are located in this region. The ability to operate relatively close to downstream industries facilitates lower transportation costs and quicker delivery. Additionally, this region is known to have a very technical workforce, giving industry operators access to an abundance of skilled workers. The states in the Great Lakes with the most establishments are Ohio (7.2%) and Illinois (4.1%).

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EstablishmentsPopulation

Distribution of establishments vs. population



Key Success Factors Supply contracts in place for key inputsA reliable supply of key inputs, such as resin, at a competitive cost, increases the company’s profitability. A supply contract fixes the price of the company’s inputs, enabling it to be more price-competitive.

Incorporating long-term sales contractsNegotiation of long-term supply contracts with customers enables manufacturers to make long-term plans relating to their level of capital expenditure. The ability to make such plans in advance could potentially save the company money.

Undertaking technical research and developmentR&D enables companies to develop new products and niche markets, giving

them a competitive edge over other industry players.

Economies of scaleThe development of large-scale production facilities enables companies to increase their profitability through the achievement of lower per-unit production costs.

Ability to quickly adopt new technologyThe faster a company adopts new technology, the faster it can use this technology to its competitive advantage.

Effective quality controlThe production of goods with consistently high quality builds a reputation that can be used to outcompete industry competitors.

Market Share Concentration

The Plastic Pipe and Parts Manufacturing industry has a low level of market share concentration. The top three players in the industry are expected to generate 22.4% of industry revenue combined in 2019. Overall, the industry comprises both large companies with a national presence and small manufacturers that operate locally. The industry does encompass a small number of large, vertically integrated petrochemical companies, although the majority of industry operators are medium-sized businesses that typically produce one type of product or cater toward one particular market. For example, one company may specialize in manufacturing corrugated high-density polyethylene (HDPE) drainage pipes for the water infrastructure market, while another manufacturer may specialize in

producing polyvinyl chloride (PVC) pipes for use in residential construction. While both of these companies may dominate their respective markets, neither dominates the industry as a whole.

The average plastic pipe and parts industry enterprise employs 74 workers and operates between one and two establishments. Companies tend to be medium size as opposed to small because plastic products manufacturing requires large capital investments and reliable to access to a wide range of raw materials at competitive prices. To lower per unit costs, companies need to produce products on a mass scale while maintaining a distribution network extensive enough to serve multiple markets. Accordingly, this type of business model tends to favor mid-sized as opposed to smaller companies.

Competitive LandscapeMarket Share Concentration | Key Success Factors | Cost Structure Benchmarks Basis of Competition | Barriers to Entry | Industry Globalization

Level Concentration in this industry is Low

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


Competitive Landscape

Cost Structure Benchmarks

Cost structure benchmarks vary between players in the Plastic Pipe and Parts Manufacturing industry depending upon the size of the manufacturing facility that they operate, with larger operators generally benefiting from lower per unit manufacturing costs. In general, manufacturers that can internalize a larger share of their costs are more competitive than others.

WagesBasic labor is used to research, develop, produce, package, market and sell industry products and manage employees. Over the long-term, continued capital investments in new plastic forming machinery has boosted worker productivity, while increasing total wage costs are associated with manufacturers filling demand for industry products over the five years to 2019. Overall, wages are expected to account for an 11.4% share of

industry revenue in 2019, compared with 10.8% in 2014.

PurchasesThe high raw material component in industry products makes the industry very sensitive to the level of raw materials prices, specifically polyvinyl chloride (PVC) resin and high-density polyethylene prices. As oil and natural gas prices increase, the price of PVC resin also increases. Oil prices stagnated during the first half of the five-year period, but a sharp increase in 2014 caused resin prices to reach a high in early 2014. Plastic pipe manufacturers responded by increasing their selling prices; however, due to the volatility of resin price changes, the full extent of the raw material price increase could never be fully passed forward to end users of plastic pipe products. Since 2015, the sudden drop in crude oil prices has

Sector vs. Industry Costs

n Profi tn Wagesn Purchasesn Depreciationn Marketingn Rent & Utilitiesn Other

Average Costs of all Industries in sector (2019)

Industry Costs (2019)

0

20

40

60

Perc

enta

ge o

f rev

enue

80

100


7.4 7.1

28.7

2.7 0.22.5

47.4

11.4

21.4

1.9 0.32.4

54.5

12.1



Cost Structure Benchmarkscontinued

reduced the price of resin, thereby initially decreasing per unit costs of plastic materials for most industry operators. As a result, purchases are expected to account for a 47.4% share of revenue in 2019.

ProfitProfit varies depending primarily on the size and scope of a company’s operations. As a result, vertically integrated manufacturers such as Westlake Chemical Corporation that produce the plastic resins needed for pipe and profile shapes production generally achieve higher and more consistent operating margins than smaller manufacturers that purchase bulk resin from other companies. Additionally, with fewer participants in the industry, price-based competition has subsided during the period, helping to ease pressure on the average industry margin. While lower input prices place downward pressure on the effective price that operators were able to price their goods at, increased demand from downstream markets gives manufacturers the ability to maintain profit. Overall, industry profit, measured as earnings before interest and taxes, is expected to remain at a 7.1% share of industry revenue over the five years to 2019.

DepreciationThe cost of new plant and equipment used to manufacture plastic pipe and shapes is significant, with overall depreciation costs accounting for an estimated 2.5% of an average company’s revenue in 2019.

MarketingMarketing is expected to account for just 0.2% of total revenue in 2019. Plastic pipe and related part manufacturers typically do not sell directly to customers, but rather work through large building supply wholesalers to distribute these products. In turn, these distributors typically engage in promotional campaigns to sell products to contractors and other customers.

RentIndustry operators that are able to produce products at a competitive cost per unit are the most successful and achieve the highest profit. To do this, industry participants must have large facilities to take advantage of economies of scale, leading to modest rent costs. This cost has stagnated during the five-year period, as the use of leased machinery, storage facilities and buildings has not significantly changed. In 2019, rent is expected to account for a 0.9% share of industry revenue.

UtilitiesUtilities are expected to account for a 1.8% share of industry revenue in 2019, representing a slight decline from its 2.0% share of industry revenue in 2014. Utility costs are relatively significant for operators to manage, as there is a certain amount of electric power necessary to power facilities.

OtherAll other expenses, which include compliance with environmental regulation, insurance and administrative costs, account for the remaining 28.7% of revenue.



Barriers to Entry There are no licensing requirements, government regulations or resource constraints significant enough to prevent companies from entering the Plastic Pipe and Parts Manufacturing industry. Still, the industry has major factors that prevent some companies from entering. Large capital investment is required to enter the industry as companies wishing to enter must purchase machines and operating space to manufacture plastic

Basis of Competition Internal competitionDue to low barriers to entry and the highly commoditized nature of most industry products, the Plastic Pipe and Parts Manufacturing industry is characterized by a high level of internal price-based competition. The industry’s three largest major players are expected to generate less than a quarter of industry revenue in 2018, leaving a large number of companies competing for the remaining share. The industry’s overall structure and the wide range of products it produces have effectively prevented major players from dominating the market as a whole, although a handful of companies dominate certain product segments or geographic regions. Still, larger operators are in a better position to negotiate lower prices for raw materials and may in turn pass these lower prices on to customers, making it difficult for smaller operators to compete.

Within this industry, operators primarily compete on the basis of price, product quality and turnaround time. Product performance attributes, including strength to weight ratios, leakage, malleability, corrosive performance, safety, installation costs and sustainability influence competition among products. Technological innovation, through internal research and development, enables companies within the industry to enhance performance attributes of their product,

extending possible uses for the product and enabling them to establish some degree of differentiation among otherwise completely substitutable products. Consistency of quality, reliability of delivery times and the provision of additional services, such as design advice also enables players to stand out among the competition.

External competitionIndustry operators also compete with suppliers of similar products and with substitute (nonplastic) products, such as metal, clay and concrete pipes. These pipes compete for several key markets such as water and sewage and agriculture. Furthermore, price competition from imports also maintains pressure on domestic producers to control production costs and prices. Low labor costs let many importers to decrease their prices, presenting a small degree of external competition to domestic manufacturers. Additionally, an appreciation in the value of the dollar makes domestically produced goods less competitive in the global market. However, the logistical challenge of transporting large plastic pipes and similar products across large distances tends to keep import penetration low, which benefits domestic manufacturers. Furthermore, plastic pipes continue to gain market share in markets that were traditionally served by concrete or metal pipes, especially in domestic markets.

Level & Trend Competition in this industry is High and the trend is Steady

Level & Trend Barriers to Entry in this industry are Medium and Steady

Barriers to Entry checklist

Competition HighConcentration LowLife Cycle Stage MatureCapital Intensity MediumTechnology Change MediumRegulation and Policy MediumIndustry Assistance Medium




Industry Globalization

The Plastic Pipe and Parts Manufacturing industry is characterized by a medium level of industry globalization. With decreasing transportation costs and multinational companies increasingly benefiting from economies of scale, globalization is a trend that will continue to be relevant in the near future. Imports account for 6.8% of domestic demand, and exports generate an estimated 10.3% of revenue in 2019. The increase in

imports from 5.6% in 2014 was largely driven by increased competition from Chinese goods and the recent appreciation of the US dollar. In contrast, exports of plastic pipes and parts have declined sharply during the period. However, the nature of industry products makes long distance transportation and shipping difficult. Accordingly, international trade remains a relatively minor factor in this industry’s performance.

Barriers to Entrycontinued

pipes and parts. The importance of research and development in the industry may also deter new entrants.

Potential entrants to the industry must invest significant financial investment to acquire, maintain and update plant and equipment. To expand, however, manufacturers must have facilities in multiple key locations. Having facilities in multiple key locations facilitates the most-prompt and least-costly delivery of goods, especially important considering the small profit margins of this industry. Larger players have an advantage

because they are able to build or acquire multiple manufacturing facilities, discouraging others from entering.

Research and development has become increasingly crucial to the industry, with companies seeking to gain a competitive advantage in a highly competitive industry. By innovating and creating new products, companies can diversify the markets that they sell to, while distinguishing themselves as strong players in the industry. Entrants must be committed to investing resources into research and development to remain competitive.


Trade Globalization Going Global: Plastic Pipe & Parts Manufacturing 2003–2019

Expo

rts/

Reve

nue

Expo

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Reve

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200

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100

50

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200

150

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Imports/Domestic Demand Imports/Domestic Demand0 040 4080 80120 120160 160

International trade is a major determinant of an industry’s level of globalization.

Exports offer growth opportunities for fi rms. However there are legal, economic and political risks associated with dealing in foreign countries.

Import competition can bring a greater risk for companies as foreign producers satisfy domestic demand that local fi rms would otherwise supply.

Export ExportGlobal Global

ImportLocal ImportLocal

Plastic Pipe & Parts Manufacturing

20032019

Level & Trend Globalization in this industry is Medium and the trend is Steady


Player Performance JM Eagle Inc. (JM Eagle) is the world’s largest plastic pipe manufacturer and is headquartered in Los Angeles. The company ships its products domestically and internationally, mostly to countries in North and South America. JM Eagle also manufactures products at a facility in Mexico for import into the United States. Overall, the company employs 2,000 workers across North America and has a production capacity of an estimated 2.2 billion pounds of plastic pipe per year.

The company produces a wide range of pipes made from various plastics, including polyvinyl chloride (PVC), polyethylene (PE), cross-linked polyethylene (PEX) and acrylonitrile-butadiene-styrene ABS. PVC pipes, the most commonly distributed type of pipe, are used regularly in irrigation, various waterworks and telecommunication infrastructure. PE pipes are used in tasks including water drainage and gas

distribution, while PEX pipes are used for agriculture and heating and ABS pipes are used for corrosion-intensive applications such as chemical processing. Despite manufacturing a diverse range of Plastic Pipe and Parts Manufacturing industry-relevant products, JM Eagle is primarily a PVC pipe manufacturer and distributor.

JM Eagle has maintained a strong market share due to its extensive distribution network and ability to serve a wide range of customers in the construction and manufacturing sectors. In an effort to maintain low shipping costs, short delivery times and competitive prices, operators locate manufacturing facilities close to large markets, such as California. The company has 21 manufacturing facilities in the United States, with five strategically placed in California for distribution to Asia and the western United States.

Major CompaniesJM Eagle Inc. | Advanced Drainage Systems Inc. | Other Companies

80.9%Other

JM Eagle Inc. 13.8%

Advanced Drainage Systems Inc. 5.3%


Major Players(Market Share)

JM Eagle Inc. (US industry-specifi c segment) - fi nancial performance*

YearRevenue

($ million) (% change)Operating Income

($ million) (% change)

2014 2,626.0 N/C 186.9 N/C

2015 2,519.0 -4.1 167.8 -10.2

2016 2,738.1 8.7 196.1 16.9

2017 2,842.6 3.8 202.5 3.3

2018 2,922.8 2.8 205.6 1.5

2019 2,949.8 0.9 210.2 2.2

*Estimates SOURCE: IBISWORLD

JM Eagle Inc. Market Share: 13.8%


Major Companies

Player Performance Based in Hilliard, OH, Advanced Drainage Systems Inc. (ADS) is a plastic pipe manufacturer with 60 manufacturing plants and 34 distribution centers across the world. The company is the world’s largest producer of corrugated high-density polyethylene (HDPE) pipe, although the company also has a significant presence in the PVC pipe and polypropylene (PP) pipe segments. ADS pipes are used in a range of applications, including storm sewers, waste management, mining, agriculture and residential and commercial drainage. Over the past two years, the company’s residential and nonresidential segments have grown significantly, while its sales

to agriculture markets have declined sharply. Across all business segments and geographic locations, the company generated total net sales of $1.4 billion and employed an estimated 4,400 workers in fiscal 2019 (year-end March). Within the United States, the company has 21 distribution centers and 44 manufacturing facilities that boast a combined annual production capacity of 1.0 billion pounds of plastic pipe.

ADS has also invested heavily in entering the storm drain and sanitary sewer market through a series of acquisitions. Prior to the period, in fiscal 2011, ADS acquired Inserta Fittings Company, a manufacturer of wastewater

Player Performancecontinued

Financial performanceSince JM Eagle is a private company, it does not publicly disclose financial statements. Over the five years to 2019, IBISWorld expects the company’s revenue to increase an annualized 2.4% to $2.9 billion. JM Eagle offers a wide range of products and serves a variety of different industries, from the construction market to the oil and gas market. Strong demand from the

nonresidential construction sector continued to drive company revenue. However, rising competition from other HDPE pipe manufacturers and constrained demand from the industrial sector has limited revenue growth somewhat during the five-year period. Despite these challenges, the company has continued to maintain a dominant share within the otherwise highly fragmented plastic pipes market.

Advanced Drainage Systems Inc. (US industry-specifi c segment) - fi nancial performance*

Year**Revenue

($ million) (% change)Operating Income

($ million) (% change)

2014-15 948.4 N/C 31.1 N/C

2015-16 1,036.8 9.3 75.8 143.7

2016-17 1,005.0 -3.1 61.1 -19.4

2017-18 1,064.3 5.9 70.6 15.5

2018-19 1,107.8 4.1 103.5 46.6

2019-20 1,160.6 4.8 107.6 4.0

*Estimates, **Year-end March SOURCE: IBISWORLD

Advanced Drainage Systems Inc. Market Share: 5.3%


Major Companies

Other Company Performance

Westlake Chemical Corporation (Westlake Chemical) is a petrochemical manufacturer founded in 1986 with headquarters in Houston. The company is a major supplier of petrochemicals and value-added plastic products with over 8,870 employees and five manufacturing locations in the United States. Westlake Chemical has grown as an enterprise through its access to affordable raw materials because of its acquisitions and vertical integration of manufacturing processes. In addition to producing industry-relevant pipe, profiles and fittings, the company also makes fence, deck, window and door components from plastic. Westlake Chemical participates in the Plastic Pipe and Parts Manufacturing industry through its building products segment of operations. Westlake

Chemical manufactures its building products segment through its subsidiary North American Pipe Corporation. Founded in 1992, the North American Pipe Corporation is one of the largest producers of PVC pipes by volume. The company serves several markets, including municipal water and sewer, residential plumbing, irrigation, agriculture and personal projects. Complimenting North American Pipe Corporation, Westlake Chemical acquired CertainTeed Corporation’s PVC business in early 2013 for $175.0 million. Furthermore, Westlake Chemical acquired Axiall Corporation in 2016 for $3.8 billion, helping the company further increase its industry-relevant revenue. The company’s industry-relevant sales are expected to reach $663.9 million in 2019.

Player Performancecontinued

and storm pipe systems, and Hancor Inc., a subsurface storm-water pipe manufacturer. In 2013, the company acquired Inlet Pipe and Protection Inc., which manufactures storm water inlet filters. Later, in mid-2014, the company filed an initial public offering. In February 2017, ADS completed the acquisition of Plastic Tubing Industries for $9.5 million to increase its market share in the manufacturing of HDPE pipe. ADS currently has over 20,000 customers worldwide, with Ferguson Enterprises and HD Supply representing the company’s two largest customers.

Financial performanceIBISWorld expects the company’s industry-relevant revenue to increase at an annualized rate of 4.1% to $1.2 billion over the five years to fiscal 2020. ADS’s largest customers come from the nonresidential and residential construction and agriculture markets. These markets have performed well during the period, bolstered by a recovering construction market, effectively spurring revenue growth for the company. Primarily driven by growth in the nonresidential and residential construction markets, IBISWorld expects industry-specific revenue to increase 4.8% in fiscal 2020.

Westlake Chemical Corporation Market Share: 3.1%


Capital Intensity The Plastic Pipe and Parts Manufacturing industry is characterized by a medium level of capital intensity. The cost of new plant and equipment is significant and constant product innovation necessitates regular investment in new production technology. Overall, IBISWorld estimates that industry operators will spend $0.22 on capital for every dollar spent on labor in 2019. The highly automated nature of the piping manufacturing process necessitates significant investment in equipment. Manufacturers convert plastic resins into value-added items using high-volume mechanized production line facilities. Despite the high degree of mechanization in the industry, skilled labor is still essential to ensure plastic

products are manufactured in compliance with standards set by a wide range of private and public organizations.

Operating ConditionsCapital Intensity | Technology & Systems | Revenue VolatilityRegulation & Policy | Industry Assistance

Level The level of capital intensity is Medium

Capital Intensity

0.5

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SOURCE: WWW.IBISWORLD.COMDotted line shows a high level of capital intensity

Capital units per labor unit

Plastic Pipe & Parts

Manufacturing

ManufacturingEconomy


Operating Conditions

Technology and Systems

PVC resin and extrusion processesPVC resin is mixed with stabilizers for thermal sensitivity, lubricants to reduce metal adhesion during processing, plasticizer for flexibility, fillers to reduce cost and increase ultraviolet light and impact resistance, impact modifiers for blocking the path of crack propagation, processing aids for more efficient processing, inorganic and organic pigments for coloring and other miscellaneous additives. The type of PVC compound mixture depends upon the product requirements and the type of processing equipment to be used.

Extrusion is the primary manufacturing process used in the production of plastic pipes. During production, PVC compound or PE is placed in an extrusion machine, where the PVC or PE material is heated into a plastic state and pulled through a sizing apparatus to produce pipe or tubing of the desired shape and size. The newly extruded pipe or tubing is moved through a water-cooling trough, marked to indicate the identity of the pipe or tubing and cut to length. An injection molding process is used to produce shapings. This process develops a melt in a method similar to the extrusion process. The melt is injected into a mold cavity by the

forward movement of an extrusion screw, filling the mold to form the part.

Product developmentOver the 10 years to 2019, innovation in pipe design has led to the availability of new products such as modified PVC (PVC-M) and orientated PVC (PVC-O) pipes. PVC-O pipe is made by the realignment of molecules by a process called biaxial orientation, which greatly enhances the circumferential strength of the pipe enabling it to convey liquids under pressure such as potable water. This technology also enables the wall thickness of PVC-O pipe to be reduced by up to 50.0% while maintaining the same pressure rating. In Plastic Pipe and Parts Manufacturing industry parlance, PVC-O has a larger bore and improved flow rates.

PVC-M was developed by adding an impact modifier to traditional PVC pressure pipes so that the material behaves in a ductile manner. This enables the pipe to be manufactured with a thinner wall and improved hydraulic properties. Foam core pipes are growing in popularity in the lightweight pipe segment. These pipes are 24 percent lighter and provide cost savings of an estimated 17.0% compared with traditional PVC pipe. Developments in

Capital Intensitycontinued

Plastic pipe manufacturing machines are specially designed to produce pipes that can be used for various applications. These machines incorporate a die, an extruder, a cutting saw, a stacker and a corrugator. The machines use plastic resin along with certain stabilizers and modifiers, and combine them in predetermined proportions, heated, pressed and fed into the extruding unit. Then, the mixed resin is poured in corrugated molds, cooled and cut into pipes. An automated sensor is used to cut them into pipes of desired length and later stacked. Plastic pipe manufacturing

machines can manufacture pipes of different lengths and thickness just by changing the molds and dies. Modern plastic pipe making machines are optimized for ease of production, wide adaptability and heavy production. The versatility of the machinery helps industry operators to keep capital intensity at a medium level because companies do not need to buy as many machines to have a diversified product line. This helps offset the large financial investment necessary to purchase plastic pipe manufacturing machines.

Level The level of technology change is Medium



Revenue Volatility The Plastic Pipe and Parts Manufacturing industry has a moderate level of revenue volatility. Plastic pipe and parts manufacturers produce a wide range of plastic products that are incorporated into the final production of other industries. Demand for plastic pipes and parts fluctuates based off demand from downstream construction, manufacturing and agricultural industries. This is exemplified in 2014,

as revitalized demand from the residential construction market lead industry revenue to jump 6.8% in 2014. The price of key inputs such as plastic resin also affects industry revenue, which is exemplified in 2015. Due to declining plastic resin prices, revenue contracted 2.7% in 2015. Alongside expanding construction markets in 2017 and 2018, revenue increased a further 3.2% and 2.9%, respectively.

Technology and Systemscontinued

production technology for other plastic types, such as high-density polyethylene (HDPE), cross-linked polyethylene (PEX) and thermoplastics have also benefited the industry.

Machine technology used to produce plastic pipe and profile shapes has also improved in recent years. Several new systems, such as water tanks with greater cooling capacity, enabled the industry to adapt more efficient technologies such as high-output twin screw extruders. Adequate cooling

remains the most significant factor limiting line speed and higher output. Recently a new technology involving nitrogen gas cooling of plastic extrusion has been developed. Other research and development conducted within the industry is focused upon expanding the use of recycled materials, improving product performance (e.g. increased strength, reduced wall thickness, increased resistance to high temperatures) and expanding product applications (e.g. high-pressure applications).

Level The level of volatility is Medium



Industry Assistance TariffsImports of tubes and pipes made from PVC, polypropylene and polyethylene are currently subject to a 6.5% ad valorem tariff (a tariff charged as a percentage of the price) if they are derived from countries that have normal trade relations (NTR) with the United States. Imports of these products from non-NTR countries are subject to a 33.5% ad valorem tariff. In general, trade-related legislation has little effect on Plastic Pipe and Parts Manufacturing industry performance since the majority of imported plastic pipes come from Canada or Mexico, neither of which are subject to

tariffs. IBISWorld does not expect tariffs and other trade-related measures to significantly affect industry performance over the coming years. However, trade relations with China have been tense in 2018, amid a possible trade war. The US and China instituted many tariffs on imported goods into the respective countries, but the Plastic Pipe and Parts Manufacturing industry is not expected to be significantly affected.

Private trade associationsThe Plastic Pipe and Parts Manufacturing industry benefits primarily from the assistance of several private trade

Regulation and Policy To enter and succeed in the domestic market, operators in the Plastic Pipe and Parts Manufacturing industry must comply with various engineering standards published by organizations such as American Society for Testing Materials, American Water Works Association and Underwriter’s Laboratory. Other important standards setting organizations (SSO) relevant to this industry include the American National Standards Institute (ANSI), National Electrical Manufacturers Association (NEMA), the CSA Group, NSF International and International Organization for Standardization (ISO). In addition to significant oversight by SSOs, industry operators are also required to comply with existing and potential federal, state and local air emission legislation.

Most plastic composites manufacturing operations generate some emissions of hazardous air pollutants (HAPs) during the application and curing of thermoset resins. In particular, the manufacturing of composite products with polyester and vinyl ester resins and gel coats can release significant amounts of styrene, which is a HAP. Air pollution

control requirements at the state and federal levels regulate these emissions, and most manufacturing facilities are required to obtain a registration or permit. Although plastic manufacturing equipment makers design their equipment and manufacturing process to comply with these standards, the regulations have nonetheless increased the price of the equipment and the cost of production. The higher costs associated with these environmental regulations are one of the reasons that companies are now attempting to manufacture in countries such as China, where environmental regulations are relatively less stringent.

Recycling legislation requiring that a certain percentage of recycled plastic be included in a specified amount of new plastic containers has been enacted in several states. Since the price of recycled resin is currently lower than the price of virgin resin, it is unclear how these regulations will affect the cost of production. Depending on the plastic product being produced, these regulations could pose a problem for manufacturers due to the higher level of impurities present in recycled plastic.

Level & Trend The level of Regulation is Medium and the trend is Steady

Level & Trend The level of Industry Assistance is Medium and the trend is Steady



Industry Assistancecontinued

associations at the national and regional levels. Important trade associations include the Society of the Plastics Industry, the Plastics Pipe Institute, American Water Works Association, the American Public Works Association and the Plastic Pipe and Fittings Association.

Established in 1937, the Society of the Plastics Industry (SPI) is the largest trade association representing plastic product manufacturers in the US. SPI represents 1,300 members across the entire plastics industry supply chain, including processors, machinery and equipment manufacturers, in addition to raw materials suppliers. Assistance provided by SPI to members includes the provision of workplace development programs, compliance assistance, trade shows, industry information and

statistics, safety and environmental programs and sales leads.

The Plastics Pipe Institute (PPI) was established nearly 60 years ago and is headquartered in Dallas. PPI currently has over 300 members including some of the largest industry players such as JM Eagle Inc. and Advanced Drainage Systems Inc. PPI’s main objective is to expand the public’s knowledge on the benefits of using plastic piping as opposed to substitutes through publications. By becoming a member, industry participants are able to exchange ideas and concerns in a public forum where each member has the same interests in mind. Members of the association are entitled to continuing education activities, trade shows and the ability to promote their company on the PPI website.


Key StatisticsRevenue

($m)

Industry Value Added

($m)Establish-

ments Enterprises EmploymentExports

($m)Imports

($m)Wages ($m)

Domestic Demand


($m)2010 13,861.1 3,005.5 892 690 36,363 1,581.1 755.7 1,856.3 13,035.7 210.12011 15,173.1 3,030.4 878 675 37,578 1,730.4 840.7 1,954.7 14,283.4 229.72012 17,330.8 3,501.0 883 664 39,212 2,122.6 905.3 2,072.9 16,113.5 235.22013 18,456.1 3,611.9 881 659 39,678 2,196.8 966.7 2,051.7 17,226.0 245.32014 19,713.5 4,002.5 866 642 40,309 2,154.7 1,039.9 2,135.6 18,598.7 257.02015 19,172.4 3,964.3 878 654 42,345 2,102.2 1,100.9 2,242.6 18,171.1 228.02016 19,914.4 4,212.2 839 626 43,504 1,888.0 1,168.0 2,268.2 19,194.4 218.52017 20,551.3 4,320.6 834 622 44,210 1,949.4 1,407.6 2,326.6 20,009.5 232.72018 21,156.4 4,428.8 835 622 45,016 2,244.9 1,660.0 2,408.7 20,571.5 243.92019 21,351.5 4,481.0 835 621 45,497 2,204.7 1,404.6 2,433.7 20,551.4 239.52020 21,697.1 4,584.7 836 621 46,151 2,225.6 1,469.3 2,469.6 20,940.8 235.12021 21,889.3 4,640.8 835 620 46,590 2,220.0 1,520.2 2,492.8 21,189.5 231.72022 22,185.8 4,727.2 838 621 47,187 2,276.8 1,579.0 2,525.1 21,488.0 228.92023 22,549.2 4,827.0 840 622 47,823 2,346.3 1,612.2 2,560.6 21,815.1 227.02024 22,915.1 4,917.4 845 626 48,481 2,378.3 1,610.4 2,597.1 22,147.2 225.9Sector Rank 88/193 90/193 94/193 101/193 84/193 91/184 147/184 90/193 102/184 N/AEconomy Rank 368/694 431/694 562/694 554/694 460/694 104/216 157/216 440/694 111/216 N/A

IVA/Revenue (%)

Imports/ Demand

(%)

Exports/ Revenue

(%)

Revenue per Employee

($’000)Wages/Revenue

(%)Employees

per Est.Average Wage

($)

Share of the Economy

(%)2010 21.68 5.80 11.41 381.19 13.39 40.77 51,049.14 0.022011 19.97 5.89 11.40 403.78 12.88 42.80 52,017.14 0.022012 20.20 5.62 12.25 441.98 11.96 44.41 52,863.92 0.022013 19.57 5.61 11.90 465.15 11.12 45.04 51,708.76 0.022014 20.30 5.59 10.93 489.06 10.83 46.55 52,980.72 0.022015 20.68 6.06 10.96 452.77 11.70 48.23 52,960.21 0.022016 21.15 6.09 9.48 457.76 11.39 51.85 52,137.73 0.022017 21.02 7.03 9.49 464.86 11.32 53.01 52,626.10 0.022018 20.93 8.07 10.61 469.98 11.39 53.91 53,507.64 0.022019 20.99 6.83 10.33 469.29 11.40 54.49 53,491.44 0.022020 21.13 7.02 10.26 470.13 11.38 55.20 53,511.30 0.022021 21.20 7.17 10.14 469.83 11.39 55.80 53,505.04 0.022022 21.31 7.35 10.26 470.17 11.38 56.31 53,512.62 0.022023 21.41 7.39 10.41 471.51 11.36 56.93 53,543.27 0.022024 21.46 7.27 10.38 472.66 11.33 57.37 53,569.44 0.02Sector Rank 117/193 155/184 117/184 78/193 128/193 82/193 129/193 90/193Economy Rank 483/694 170/216 134/216 222/694 489/694 117/694 348/694 431/694

Figures are in inflation-adjusted 2019 dollars. Rank refers to 2019 data.

Revenue (%)

Industry Value Added

(%)

Establish-ments

(%)Enterprises

(%)Employment

(%)Exports

(%)Imports

(%)Wages

(%)

Domestic Demand

(%)


(%)2011 9.5 0.8 -1.6 -2.2 3.3 9.4 11.2 5.3 9.6 9.32012 14.2 15.5 0.6 -1.6 4.3 22.7 7.7 6.0 12.8 2.42013 6.5 3.2 -0.2 -0.8 1.2 3.5 6.8 -1.0 6.9 4.32014 6.8 10.8 -1.7 -2.6 1.6 -1.9 7.6 4.1 8.0 4.82015 -2.7 -1.0 1.4 1.9 5.1 -2.4 5.9 5.0 -2.3 -11.32016 3.9 6.3 -4.4 -4.3 2.7 -10.2 6.1 1.1 5.6 -4.22017 3.2 2.6 -0.6 -0.6 1.6 3.3 20.5 2.6 4.2 6.52018 2.9 2.5 0.1 0.0 1.8 15.2 17.9 3.5 2.8 4.82019 0.9 1.2 0.0 -0.2 1.1 -1.8 -15.4 1.0 -0.1 -1.82020 1.6 2.3 0.1 0.0 1.4 0.9 4.6 1.5 1.9 -1.82021 0.9 1.2 -0.1 -0.2 1.0 -0.3 3.5 0.9 1.2 -1.52022 1.4 1.9 0.4 0.2 1.3 2.6 3.9 1.3 1.4 -1.22023 1.6 2.1 0.2 0.2 1.3 3.1 2.1 1.4 1.5 -0.82024 1.6 1.9 0.6 0.6 1.4 1.4 -0.1 1.4 1.5 -0.5Sector Rank 96/193 99/193 123/193 129/193 85/193 135/184 183/184 88/193 128/184 N/AEconomy Rank 421/694 403/694 502/694 512/694 409/694 155/216 212/216 414/694 147/216 N/A

Annual Change

Key Ratios

Industry Data



Apr 2017 - Mar 2018 by company revenueApr 2014 - Apr 2015 - Apr 2016 - Apr 2017 - Small Medium LargeMar 2015 Mar 2016 Mar 2017 Mar 2018 (<$10m) ($10-50m) (>$50m)

Liquidity Ratios

Current Ratio 1.8 2.2 2.2 2.1 2.4 2.2 1.6Quick Ratio 0.9 1.0 1.0 0.9 1.2 1.0 0.8Sales / Receivables (Trade Receivables Turnover) 8.6 8.9 8.7 7.9 8.3 8.0 7.4

Days’ Receivables 42.4 41.0 42.0 46.2 44.0 45.6 49.3Cost of Sales / Inventory (Inventory Turnover) 5.5 5.7 5.1 5.0 6.0 4.8 4.6

Days’ Inventory 66.4 64.0 71.6 73.0 60.8 76.0 79.3Cost of Sales / Payables (Payables Turnover) 12.5 13.6 12.7 13.2 14.1 14.8 10.6

Days’ Payables 29.2 26.8 28.7 27.7 25.9 24.7 34.4Sales / Working Capital 7.7 6.6 6.2 7.1 6.3 6.8 8.4

Coverage Ratios

Earnings Before Interest & Taxes (EBIT) / Interest 7.4 8.9 10.2 6.9 4.2 10.4 6.7

Net Profit + Dep., Depletion, Amort. / Current Maturities LT Debt 2.4 2.7 3.0 3.2 n/a 3.0 4.5

Leverage Ratios

Fixed Assets / Net Worth 0.8 0.7 0.7 0.6 0.7 0.5 0.8Debt / Net Worth 1.4 1.1 1.1 1.0 0.9 0.8 1.5Tangible Net Worth 36.2 40.6 37.2 41.6 43.2 45.7 35.3

Operating Ratios

Profit before Taxes / Net Worth, % 25.2 24.1 26.2 22.1 20.0 25.9 20.7Profit before Taxes / Total Assets, % 8.8 10.4 9.7 9.1 8.4 11.2 7.7Sales / Net Fixed Assets 7.1 6.7 6.1 6.5 6.8 7.7 4.8Sales / Total Assets (Asset Turnover) 1.8 1.9 1.8 1.7 1.9 1.8 1.6

Cash Flow & Debt Service Ratios (% of sales)

Cash from Trading 28.0 27.1 32.2 28.1 31.9 32.4 15.2Cash after Operations 7.5 6.7 10.5 7.1 7.1 9.1 4.8Net Cash after Operations 6.1 6.9 9.6 6.8 6.9 8.3 4.9Cash after Debt Amortization 1.6 3.1 2.6 1.6 2.2 1.6 0.5Debt Service P&I Coverage 2.0 3.4 3.7 2.0 1.9 3.6 1.9Interest Coverage (Operating Cash) 6.3 11.6 13.9 7.4 5.1 14.5 4.0

Assets, %

Cash & Equivalents 7.9 9.8 8.4 7.7 9.2 8.3 5.8Trade Receivables (net) 22.6 22.3 22.3 23.5 26.4 23.8 20.8Inventory 26.9 26.6 27.1 26.1 24.2 27.2 26.2All Other Current Assets 1.2 1.5 1.8 1.9 0.6 3.4 1.2Total Current Assets 58.7 60.3 59.6 59.2 60.5 62.6 54.0Fixed Assets (net) 29.6 28.7 29.5 29.6 31.8 26.2 31.9Intangibles (net) 6.7 5.8 6.4 4.8 1.1 2.9 10.1All Other Non-Current Assets 5.1 5.2 4.5 6.5 6.6 8.3 4.0Total Assets 100.0 100.0 100.0 100.0 100.0 100.0 100.0Total Assets ($m) 4,894.7 3,728.3 3,578.1 3,813.4 90.1 580.2 3,143.1

Liabilities, %

Notes Payable-Short Term 9.2 9.3 9.0 9.3 9.5 9.0 9.4Current Maturities L/T/D 3.2 3.3 2.9 2.7 3.3 2.5 2.3Trade Payables 12.9 12.2 13.1 10.9 10.8 10.3 11.9Income Taxes Payable 0.2 0.3 0.2 0.2 0.1 0.2 0.4All Other Current Liabilities 6.2 6.6 6.0 7.7 4.6 8.9 8.7Total Current Liabilities 31.7 31.7 31.1 30.8 28.3 30.9 32.6Long Term Debt 16.6 14.5 17.4 15.3 19.3 10.4 18.0Deferred Taxes 0.8 0.9 0.8 0.8 0.3 0.9 1.0All Other Non-Current Liabilities 8.0 6.4 7.2 6.7 7.8 9.1 3.0Net Worth 42.9 46.4 43.6 46.4 44.3 48.6 45.4Total Liabilities & Net Worth ($m) 4,894.7 3,728.3 3,578.1 3,813.4 90.1 580.2 3,143.1

Maximum Number of Statements Used 145 133 119 104 28 42 34

Industry Financial Ratios

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.


Jargon & Glossary

BARRIERS TO ENTRY High 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 PRICES The 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 DEMAND Spending 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.

EMPLOYMENT The 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.

ESTABLISHMENT The 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.

EXPORTS Total 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 CONCENTRATION An 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 REVENUE The 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 TRADE The 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 CYCLE All 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.

Industry Jargon

IBISWorld Glossary

CORRUGATED Shaped into alternating parallel grooves and ridges.

HIGH-DENSITY POLYETHYLENE (HDPE) A strong, relatively opaque form of polyethylene that has a dense structure with a few side branches off the main carbon backbone.

POLYVINYL CHLORIDE (PVC) A white, water-insoluble, thermoplastic resin, derived by the polymerization of vinyl chloride. It is used chiefly for thin coatings, insulation and piping.

VERTICAL INTEGRATION Owning different parts of the supply chain, either in the form of backward integration (owning upstream suppliers) or forward integration (owning downstream buyers).


Jargon & Glossary

NONEMPLOYING ESTABLISHMENT Businesses with no paid employment or payroll, also known as nonemployers. These are mostly set up by self-employed individuals.

PROFIT IBISWorld 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.

VOLATILITY The 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%.

WAGES The gross total wages and salaries of all employees in the industry. The cost of benefits is also included in this figure.

IBISWorld Glossary continued

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