As the close of 2008 approaches, it’s been something of a tumultuous twelve months that many will wish to put firmly behind them.
Escalating oil prices, a consumer crippling credit crunch, and a generally negative global financial predicament have perhaps been the year-defining headlines.
A reported downturn in output for industries such as manufacturing has also been felt, yet the industrial gas business appears as buoyant as ever. As the industry continues to grow and remain resolute despite the worldwide wobble, estimates suggest global revenues of almost $60bn for the industrial gas business - and rising.
Moving on into 2009, some industry insiders expect strong growth to continue throughout the year ahead and beyond.
So just how does the industry keep progressing? And what have we learned this year?
End of year update
Some see the market growing at a rate of around 7% annually, unperturbed by the enveloping financial crisis that currently grips the globe. The Linde Group revealed in its Interview of the Month with gasworld earlier this year, that it intends to grow faster than the market and increase earnings at a faster rate than sales. So what does this mean for the industry?
Well, when one of the biggest industry players expects such bullish growth it appears encouraging for the industrial gas business as a whole. Similarly, projected figures from Spiritus Consulting anticipates an industrial gas market valued at just over $58bn in 2007 and expected to have risen to $62.7bn by the close of 2008.
A calculated compounded annual growth rate (CAGR) of around 8.3% for the period 2006-2011 appears to support such estimations.
In terms of the market highlights for such a prospering business, clearly the packaged gases sector remains the strongest as it is estimated to have accounted for $24.5bn of revenues in 2007, compared with onsite’s estimated at $15bn in 2007.
When looking at anticipated CAGR figures from Spiritus, it seems that both the onsite gases (9.9%) and bulk gases (9.7%) businesses have a healthier rate of growth to look forward to over the duration of 2006-2011, while equipment revenues are expected to rise 8% for the same period. CAGR for packaged gases is likely to be merely 6.3%.
Growth rates aside, however, and the numbers speak for themselves as packaged gases are expected to account for revenues of $24.9bn in 2008, rising to an estimated $26.3bn in 2009. Further behind is the onsite business at a value of $15.1bn in 2007, rising to $15.8bn in 2008 and an expected $17.2bn in 2009.
Similarly, the bulk gases business is likely to grow from a value of $14.9bn last year to around $18.3bn this year and furthermore, around $20.6bn by 2009. Of much smaller value is the equipment trade, estimated to be worth approximately $3.4bn in 2007 and rising to $3.57bn this year. A further marginal increase is expected in 2009, with equipment predicted to be worth $3.83bn by then.
What have we learned throughout the year?
Central to the healthy industry value of $62bn for 2008 is the North America gases market, expected to boast revenues of $20.2bn by the end of this year.
We’ve seen that developed gases markets such as Western Europe and North America continue to exhibit strong growth and build upon their solid platforms, while emerging markets such as Eastern Europe and the Middle East develop at a pace of real velocity.
The Middle East is in fact a region of much gases potential and though is only thought to account for around 2% of the industrial gas market, prospects are believed to be here in abundance with estimations from Linde and the Spiritus Group that growth rates of 20% could be expected in the region.
Predominantly packaged gas-led (65% business share), the Middle East is thriving with fresh opportunities and areas for development as high oil prices change the investment climate and the number of air separation plant projects significantly rises.
Eastern Europe continues to showcase its potential as its gases market boasted revenues of around $2bn in 2006 – a rise of 18% for the year – and is expected to see a CAGR of a generous 10.7% for the period 2006-2011, one of the highest forecasted of all the regions.
Almost as high is the CAGR of 9.5% expected for the South Pacific Rim market during the same five year period. As the South Pacific Rim continues to grow at a healthy pace and builds upon its market share of 5.1% in 2006/7, Spiritus estimates this to be the 5th largest industrial gases market and forecasts further revenue rises in the years to come.
Revenues of an anticipated $2.9bn in 2007 are likely to have reached around $3.2bn in 2008 and $3.5bn in 2009.
In the neighbouring North Pacific Rim, the overall outlook appears very promising for a market which is believed to account for around 20% of the entire global gases industry.
Revenues of an estimated $11bn in 2007 seem set to have increased by a further $700m by the close of this year (2008), with such a growth rate expected to propel the market to a value of more than $14bn by 2011. The region comprises of a relatively mature gases market in the shape of Japan, where growth is limited to a certain extend, yet only the North American and Western Europe markets would remain ahead by 2011.
Having grown by an impressive 15% in 2006, overall revenues in Africa appear to affirm the potential that the region upholds, with Spiritus estimating a CAGR of 15.2% for the region for the period 2006-2011. Economic growth shows no sign of relaxing in the Asian market either, as its gases industry witnessed a steady increase of 12% in 2006 to reach revenues of $645m. A CAGR of 11.5% from 2006-2011 is second only to Africa and appears to confirm the level of optimism for the Asia region.
Expected strong end-use segments for the future
Perhaps unsurprisingly, the industries that are predicted to feed a growing gases appetite the greatest are chemicals, refining, metallurgy, and electronics.
As an end-user segment, the electronics industry shows a CAGR 10.5%, while both the chemicals and refining sectors are marginally behind at an anticipated CAGR of 10% for the period 2006-2011. Metallurgy comes a close third with growth of 9% expected, followed by the manufacturing industry at a CAGR of 7.7%
This summer our gasworld Focus Features explored the role of gases in sports and infrastructure, conveying how an event such as the Beijing Olympics can serve as a healthy growth driver for the industrial gas business.
It was also noted how this year’s spectacular sporting event came at a cost for local industry in China, as a number of industrial factories were forced to close amid a desire for reduced air pollution.
A recent Business News report from the BBC confirmed what gasworld had suspected, that the rate of growth of China's industrial output was hampered by the temporary closure of facilities.
According to the report, industrial output in China slowed to a six-month low in August, hit by the temporary closure of factories for the Olympics. With hundreds of facilities shut to help improve air quality for the games, output growth slowed to 12.8% compared with August 2007. This also compare with 14.7% in July (2008).
Quite how, or indeed if, the gases industry was effected by this slump has yet to be noted.
Other highlights to have emerged
Something else which has been widely acknowledged this year is the huge growth to come from the rapidly advancing solar cell market.
The impact of this booming industry is already being felt across the industrial gas community, as a number of contracts for gas supply have already been inked by companies such as Linde, Air Liquide, Air Products, Praxair and Linde Nippon Sanso.
This could represent just the beginning for a flourishing market, which promises to deliver extensive gas demand in future.
According to The Linde Group’s 2007 Annual Report, demand for electronic gases in the semiconductor and solar cell industries continues to outpace global GDP growth by more than two times.
As explored in gasworld’s July magazine feature Gases in Electronics - Crystal-line clear potential, this demand is driven by the use of gases across the whole electronics manufacturing chain. Four key elements comprise this sector – notably electronic gases, high purity core gases, services, and equipment.
While growth of around 8% per year until 2010 is expected in traditional semiconductor segments such as microchips and flat panel displays, the annual anticipation for the solar sector lies at around 30%.
Again, according to Linde’s 2007 Annual Report industry experts expect that from 2012, photovoltaic producers will spend more on gases than flat-screen manufacturers. Furthermore, from 2017 these are set to overtake the chip sector.
While a gloomy financial cloud hangs low in the skies above the globe at present, the industrial gas business remains unaffected and looks to be performing prominently. Regional revenue rises continue to illustrate the promising position of the industry as openings continue to arise and persistent progress is made throughout.
As 2009 beckons, so too does a global industrial gases market estimated to be worth a mighty $67.9bn.