Los Angeles, California — The urethane foam industry is "bouncing back readily from the depths of the recession," according to IBISWorld industry analyst Nima Samadi: "This industry was previously driven by strong performances in its downstream markets, such as the housing and automotive sectors."
Samadi notes that, from 2007 to 2009, nearly all industry market segments contracted, hampered by the economic downturn. But since then, a slow recovery as downstream demand strengthened, boosted industry revenue an estimated 9.7 percent and 2.4 percent in 2010 and 2011, respectively.
IBISWorld says that although this upward trend is anticipated to continue in 2012 with a 2.6 percent jump, revenue is estimated to decline at an annualised rate of 4.1 percent to $8.6 billion in the five years to 2012.
The PU foam industry is heavily reliant on a variety of industries and the meltdown of the housing market and subsequent reduction in demand for construction and renovation resulted in considerably less cash from construction-related foam purchases, including insulation and carpet cushioning.
"Because the furniture manufacturing sector, which purchases foam for furniture cushions, mattresses and pillows, is largely driven by the housing and construction markets, its poor performance during the recession also led to a drop in demand for industry products," said Samadi.
Meanwhile, the domestic automotive industry's collapse in 2008/09 resulted in reduced demand for automotive seat foam and other interior parts, the company says in a revision of its PU foam report.
An aggressive recovery in 2010 has continued into 2011 and 2012, resulting in a rebound in this market's foam purchases, the analyst says.
Over the next five years, research and development for foam as a substitute for other materials will continue to provide opportunities for growth in a number of market segments.
Foam manufacturers are expected to achieve the "impressive level of revenue growth they achieved before the economic downturn," the group says, punctuated by robust activity in the motor vehicle manufacturing and construction sectors during the five years to 2017.
At the same time, industry concentration is forecast to increase, albeit slowly, as companies make a concerted effort to increase profitability by claiming larger portion of market share.
IBISWorld says the industry's large number of small firms will change via key acquisitions, helping companies build economies of scale. This will be difficult, however, as facilities are typically spread over several states to mitigate transport costs associated with shipping industry products.
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