Chemical Distributors Maintain Important Role in Supply Chain

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Chemical distributors — or, as U.S. Census refers to this category, “Merchant Wholesalers” — play an important role in the supply chain, warehousing and distributing a wide variety of chemicals that are used by chemical manufacturing industries, such as coatings and adhesives manufacturers. They deal in both commodity and specialty chemicals that are obtained from a variety of basic chemical manufacturers both domestic and foreign.

While a large percentage of chemicals are sold directly to end users by their manufacturers, the share of chemical shipments that passes through the distribution channel has remained relatively constant for the past 10 years or so, normally comprising approximately 15 percent of total shipments of chemicals (the percentage in 1992 was approximately 12 percent by comparison.) As shown in Figure 1, chemical distributors sales have not only tracked the overall shipments of chemicals, but have been relatively flat since the recovery from the recession of 2007 to 2009.


Figure 1: Chemical Sales, Merchant Wholesalers; Manufacturers ; Source: U.S. Census

Distributors play a similarly important role in inventory management for manufacturing industries, holding millions of dollars in inventory in a position closer to the end user. Figure 2 shows levels of inventory held by chemical merchant wholesalers, as compared with chemical manufacturers’ inventory levels. Note that distributors currently maintain an inventory/sales ratio of approximately 1.9 versus a comparable ratio of approximately 1.3 for all merchant wholesalers.

Overall, the Census reported on Aug. 9 that sales of merchant wholesalers (not including manufacturers’ sales branches and offices), were $465.8 billion, up 0.7 percent from the revised May level, and up 5.5 percent from the June 2016 level on a seasonally adjusted basis. Total inventories held by those merchant wholesalers were $599.4 billion at the end of June, up 0.7 percent from the revised May level. The June inventories/sales ratio for merchant wholesalers was 1.29, while the June 2016 ratio was 1.32.

Contact ACA’s Allen Irish for more information.