WWW.IBISWORLD.COM Special Report Month 2012 1 Follow on head on Master page A Special Report July 2012 Top 5 US Export and Import Commodities By Josh McBee and Justin Waterman Dominated by oil, cars and chemicals, US companies face both opportunity and competition in these top trading industries. Petroleum refining leads the pack in export and import markets IBISWorld constantly monitors trade data for industries that export goods. Clients can leverage information about emerging markets and hot export commodities to identify opportunities in overseas markets. At the same time, imports are also a key component of the IBISWorld database. For most US producers, cheaper imports pose a serious threat to their profit margins and the future of their industry in America. In this special report, IBISWorld identifies the top five import and export commodities to illustrate the relationship between them. Across the US economy, some macroeconomic traits are common at the trade levels of every manufacturing industry. First, Canada and Mexico feature prominently across several industries as primary sources of imports and destinations for American-made goods. Their trade dominance stems from shared borders with the United States that facilitate freight movements and eliminate tariffs as a result of the 1993 North American Free Trade Agreement (NAFTA). IBISWorld data analysis and research have revealed that exports represent a key opportunity in each of the relevant industries, while imports consistently pose a threat to the profitability of US manufacturers. For exports, the depreciation of the US dollar has made US-manufactured goods cheaper for foreign buyers since 2007 and facilitated the exploration of new markets. At the same time, rising affluence has spurred export sales thanks to ongoing industrial expansion in emerging economies. Regarding imports, overseas operations lack many of the compliance and labor pressures that US firms experience. In turn, they achieve greater efficiencies in their operations and more effectively compete on price. An increase in import penetration takes away revenue that industry players would capture otherwise. Import penetration increases when American consumers and manufacturers purchase cheaper foreign-made goods. The demand for oil, vehicles and chemicals dominates US trade. Three of the top 10 industries are oil-based, three are vehicle-focused and the remaining four process chemicals into synthetic materials and drugs. While the relationship between vehicles and gasoline is evident, these commodities also reflect the need for petroleum-based inputs that companies process into plastic and rubber parts for cars and trucks. The following rankings for each commodity are based on the expected 2012 export and import dollar values found in that commodity s corresponding IBISWorld report. 1 www.ibisworld.com 1-800-330-3772 info@ibisworld.com
WWW.IBISWORLD.COM Special Report July 2012 2 Exports 1. Petroleum Refining 2012 export estimate: $108.0 billion Despite the relatively small role of exports within the US Petroleum Refining industry (IBISWorld report 32411) exports account for an estimated 15.0% of the $725.0-billion industry) foreign demand for refined products is expected to grow rapidly over the next five years. Hydraulic fracturing (or fracking ) is projected to increase US output, thereby lowering prices for crude inputs. Refineries will then be able to sell their output at a more competitive price on the world market. During the past five years, Chile, Panama and Brazil emerged as major destinations for US-refined petroleum. 2. Organic Chemical 2012 export estimate: $44.9 billion Exports of organic chemicals (IBISWorld report 32519) are expected to generate more than one-third of the overall industry s revenue in 2012. Key exports include phenol (used in plastics), acetic acid (used for films), vinyl acetate (used in adhesives, textiles, inks and paints) and aniline (used in rubber, herbicides and dyes). With the exception of 2009, exports have consistently increased during the past five years. Responding to the decreasing value of the dollar in relation to the euro, Europe has become the largest market for organic chemical exports over the past five years. As the value of the US dollar weakens, US goods are becoming cheaper for European countries. European Unionmember country Belgium accounts for about 17.0% of demand in 2012, but China has grown to account for an estimated 13.0%. 3. Car and Automobile 2012 export estimate: $43.7 billion Low domestic sales encouraged car and automobile manufacturers (IBISWorld report 33611a) to expand into international markets during the past five years. Because China and Saudi Arabia are rapidly growing export markets for US-made goods across the board, US automakers have targeted these countries as prime destinations for their vehicles. Five years ago, only about 1.7% of US automobile exports were destined for China, compared to 11.3% today. China and Saudi Arabia s rise in the automobile marketplace is due to each country s rapidly growing affluence, which is radically changing lifestyles and increasing the standards of living in those countries. 4. Plastic and Resin 2012 export estimate: $40.4 billion Exports have been one of the few consistent sources of demand for plastic and resin manufacturers (IBISWorld report 32521) during a time of volatile demand from domestic manufacturers, the construction sector and other key buying markets. The Exportsasashareofrevenue Industry 2007 2012 Result Petroleum Refining 5.3% 14.9% Increase Car and Automobile 46.0% 48.2% Increase Copper, Zinc and Lead Refining 121.2% 147.8% Increase Organic Chemical 36.1% 35.9% Decrease Plastic and Resin 31.6% 40.1% Increase SOURCE: WWW.IBISWORLD.COM
WWW.IBISWORLD.COM Special Report July 2012 3 varied uses for plastics and increasing manufacturing activity abroad have supported sales to foreign nations. Exports are helping not only to mitigate some of the declines in domestic demand during the recession, but also to fuel the industry s strong recovery after the recession. For example, the Dow Chemical Company reported record sales of $19.4 billion to emerging markets during 2011. Behind Mexico and Canada, China and Belgium round out the remainder of the top four exporting destinations. Collectively, these four countries account for more than half of total plastic and resin exports. 5. Brand Name Pharmaceutical 2012 export estimate: $29.0 billion US-based manufacturers are expected to produce roughly half of all pharmaceuticals on the world market in 2012. During the past five years, the Brand Name Pharmaceutical industry s (IBISWorld report 32541a) exports have increased at an estimated annualized rate of 8.1% and accounted for an average 24.2% of industry revenue. The European Union is the main destination for US pharmaceutical exports, with Germany leading the way at an estimated 15.0% of all US pharmaceutical exports. While exports to Germany have been rising over the past five years, exports to Belgium and Switzerland have been falling in line with competition from cheaper sources. Imports 1. Oil Drilling and Gas Extraction 2012 import estimate: $292.4 billion Although foreign oil drilling and gas extraction provides the United States with more imports than any other industry (based on dollar value), these activities share is decreasing. In 2007, imported crude oil and gas satisfied 49.5% of domestic demand, but it is expected to fall to 46.3% of domestic demand in 2012. This drop is in response to alternative energy vehicles (requiring less or no gas) and shifts in the trade-weighted index. While Americans are demanding more oil and gas, the weakening of the US dollar is driving demand for relatively cheaper domestic oil and gas, pushing up Oil Drilling and Gas Extraction industry (IBISWorld report 21111) revenue 3.4% per year on average to $345.9 billion in the five years to 2012. 2. Petroleum Refining 2012 import estimate: $143.7 billion Imports of petroleum are expected to rise an annualized 7.1% to $143.7 billion in the five years to 2012 to satisfy downstream demand for crude oil. Domestic production of gasoline, a major product segment in this industry, is not satisfying all domestic demand, so foreign petroleum fills 18.7% of America s demand. This import Importsasashareofdomesticdemand Industry 2007 2012 Result Oil Drilling and Gas Extraction 49.5% 46.3% Decrease Petroleum Refining 15.9% 18.7% Increase Car and Automobile 75.0% 72.8% Decrease Brand Name Pharmaceutical 32.5% 44.3% Increase SUV and Light Truck 39.7% 41.3% Increase SOURCE: WWW.IBISWORLD.COM
WWW.IBISWORLD.COM Special Report July 2012 4 penetration has risen from its 15.9% position in 2007 due to a lack of available domestically produced petroleum as part of the resource s naturally depleting characteristic and also because of America s bulking of its national petroleum reserves. While the main sources of imported petroleum products by value are Canada, Russia, Saudi Arabia, Venezuela and the United Kingdom, each country s share of imports into the United States has remained relatively stable except for Russia, which has about tripled its exports into America since 2000. 3. Car and Automobile 2012 import estimate: $125.9 billion Imports of cars (excluding SUVs) are expected to fall at an annualized rate of 3.3% during the five years to 2012 in response to poor domestic demand. Consumer sentiment and income were hit hard during and in the wake of the recession, with many consumers delaying purchases of big-ticket items like cars. Because Americans demanded more fuel-efficient vehicles during the past five years (primarily produced by foreign automakers, including the number-one selling hybrid Toyota Prius), it might seem counterintuitive that car imports have fallen. This apparent discrepancy is due to a strategic move by Asian automakers to increase their manufacturing presence in the United States. Some Asian automakers, including Toyota, opened new plants stateside to satisfy growing American demand for fuel-efficient vehicles. In addition, almost all automakers have been reaping the benefits of increased efficiencies and higher vehicle output in American manufacturing facilities over the past five years. With a greater number of small fuel-efficient vehicles produced domestically, demand for imports declined. 4. Brand Name Pharmaceutical 2012 import estimate: $87.1 billion The significantly lower prices available for common brand-name prescription drugs in Canada and other countries has led some individuals and state governments to import drugs from those countries. Although importing prescription drugs is usually illegal, citizens are allowed to bring a 90-day prescription supply from Canada into the United States. The high cost savings offered by imported drugs spurred import activity, a trend that has increased at an average annual rate of 9.1% to $87.1 billion in the five years to 2012. Further supporting growth is a heavy shift from where pharmaceutical ingredients are manufactured: Most ingredients used to be manufactured in the United States, but now about 80.0% are estimated to be manufactured in China and India, according to the New York Times. And about one-fifth of brand-name pharmaceutical imports are currently sourced from Ireland. As a result, imports now satisfy about 44.3% of domestic demand, up from 32.5% in 2007. Deficitsamongthetopfivecommodities Year Exports ($billion) Imports ($billion) Deficits ($billion) Car and Automobile 43.7 125.9-82.2 Brand Name Pharmaceutical 29.0 87.1-58.1 Petroleum Refining 108.0 143.7-35.7 SOURCE: WWW.IBISWORLD.COM
WWW.IBISWORLD.COM Special Report July 2012 5 About IBISWorld Inc. Recognized as the nation s most trusted independent source of industry and market research, IBISWorld offers a comprehensive database of unique information and analysis on every US industry. With an extensive online portfolio, valued for its depth and scope, the company equips clients with the insight necessary to make better business decisions. Headquartered in Los Angeles, IBISWorld serves a range of business, professional service and government organizations through more than 10 locations worldwide. For more information, visit www.ibisworld.com or call 1-800-330-3772. 5. SUV and Light Truck 2012 import estimate: $76.7 billion Imports of SUVs and light trucks are anticipated to fall at an annualized rate of 3.7% to $76.7 billion in the five years to 2012, down from $92.4 billion. Imports have decreased as a result of still-low domestic demand and foreign automakers shift toward smaller vehicles. Imports as a percentage of domestic demand, however, are estimated to rise over the period from 39.7% in 2007 to 41.3% in 2012. This growth is because SUV and Light Truck (IBISWorld report 33611b) industry revenue has fallen at a faster rate than the value of imports. Although consumers are demanding more fuel-efficient cars, taking revenue away from this industry, the consumers who still choose to purchase SUVs are increasingly likely to purchase fuel-efficient SUVs and trucks. Most fuel-efficient trucks and SUVs are sourced from Asia and Canada. As such, imports will resume growth over the next five years, especially as the US economy slowly recovers and there is less of a reliance on fuel-efficient vehicles. In the years ahead, ongoing weakness in the US dollar relative to foreign currencies will likely sustain overseas demand for US exports. Meanwhile, continued industrialization, urbanization and related rising affluence in countries like China will facilitate the ability of producers and consumers to purchase US goods. As a whole, imports are satisfying a higher share of domestic demand in 2012 than they did in 2007. This expansion stems from uncontrollable natural resource locations, cheap labor and loose environmental regulations. The future of imports depends largely on discovering petroleum, creating and adopting alternative fuel sources, the tradeweighted index and labor and trade regulation changes. Contact: Savannah Haspel VP, Public Relations IBISWorld Phone: 1-310-866-5044 savannahh@ibisworld.com www.ibisworld.com 1 Historical trade data is sourced from the US International Trade Commission s DataWeb service. Some industrial codes that register as top five industries according to their trade value have been excluded because of a changed recording method in the government s DataWeb that skews the data. These excluded codes refer to miscellaneous waste and scrap as well as the Aircraft, Engines and Parts industry (IBISWorld report code 33461a).
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