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Decreasing demand for heavy industrial construction has weighed heavily on profit margins, but the industry is set to recover over the next five years; the economic recovery, along with improvements in domestic energy demand and the availability of finance, will drive growth. For these reasons, industry research firm IBISWorld has updated a report on the Heavy Industrial Facilities Construction industry in its growing industry report collection.
Los Angeles, CA (PRWEB) February 17, 2013
The Heavy Industrial Facilities Construction industry has begun to show signs of stable recovery following aggressive revenue decline as a result of the financial crisis. Revenue for the industry surged in the mid-2000s as firms benefited from an increased demand for new plants from private power companies that began in the late 1990s after the deregulation of the energy industry. However, the industry's environment was radically altered by the recession when demand for industrial facilities development slowed and financing was restricted for all construction projects. “More recently, the Heavy Industrial Facilities Construction industry has slowly built momentum, with revenue rising each year since 2009,” says IBISWorld industry analyst Austen Sherman. Demand for industry services has improved as a move toward renewable and clean energy has reinvigorated downstream markets. In addition, government spending tied to operations abroad and fiscal stimulus packages has largely supported the industry. Nevertheless, the decline in 2009 will likely offset recent growth, with revenue falling at an annualized rate of 0.7% to $26.0 billion during the five years to 2013. A recent extension of the renewable energy production tax credit is likely to keep demand high in the energy market, pushing revenue up 2.2% in 2013.
As revenue improved during the past four years, the number of industry operators began to rise, increasing the level of competition in the industry. Firms in the industry compete for jobs by submitting a bid, and investors seek the bid that will complete the intended project with high quality at the lowest cost. Consequently, industry profit margins have dwindled during the past five years. Average industry profit has dropped from an estimated 7.0% in 2008 to 6.3% in 2013. The overall value of utilities construction, the availability of credit and movement in specific downstream industries all play a large role in driving the direction of the Heavy Industrial Facilities Construction industry. During the next five years, government regulation of power generation, such as the push for cogeneration power plants that encourage retrofits and new construction, will benefit industry performance. Industry revenue should also receive a boost from the continued growth of renewable energies that require new and more efficient transmission equipment.
The Heavy Industrial Facilities Construction industry has a medium degree of concentration of ownership, with the four largest firms estimated to account for 45.7% of industry revenue. The industry is somewhat fragmented due to the prevalence of small-scale establishments evident from the annual survey of County Business Patterns. The survey shows that about half of establishments employ fewer than five people. A large number of small firms handle larger projects by subcontracting labor when necessary. Smaller firms often focus on the repair and maintenance of facilities and equipment, while larger operators secure the majority of large construction projects. According to Sherman, the size of larger firms allows them to complete the large construction projects associated with the industry in a more reasonable time frame. Despite the prevalence of many small-scale participants, this industry is considered to be less fragmented than most in the construction sector and contains several very large-scale firms that contribute a significant share of industry revenue. For more information, visit IBISWorld’s Heavy Industrial Facilities Construction in the US industry report page.
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IBISWorld industry Report Key Topics
Firms in this industry primarily construct, alter, add to, repair and maintain industrial nonbuilding structures, such as chemical complexes, cement plants, refineries, incinerators, ovens, kilns, power plants (except hydroelectric) and nuclear reactor containment structures. Establishments in the industry may subcontract some of the actual construction work.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
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 http://www.ibisworld.com or call 1-800-330-3772.
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