2006 has been another successful year for the gas industry as a whole with both volumes and prices rising in all regions around the world. In some regions and countries, argon demand has virtually outstripped supply \\$quot;“ driven by much higher steel output. This has led to companies looking at how to source additional volumes of the gas.

Argon makes up 0.934 per cent of the air we breathe. It is recovered from the oxygen output of modern ASUs, of which it constitutes approximately four per cent.

Lack of capacity
According to industry analysts, there is a total of 1.2 million tpd of oxygen production installed worldwide. The worldwide argon production, taken to be 1.5% of oxygen capacity, is therefore about 18,500 tpd. However, because some ASUs are older than 25 years and may not have had argon columns installed, actual production capacity is below the worldwide estimate. It is costly to retro fit them, and the size of the plant and market determine whether a gas company does this.

In addition, about half of the worldwide oxygen capacity is owned by the end users, who may not require argon recovery.

In some regions, there has been little investment in new ASUs over the past 15 years. This is particularly true in the US. Reasons for the lack of investment in production capacity include a combination of oversupply of gases, a maturing market and pricing below the replacement rate. Also, different demand characteristics in the US \\$quot;“ for example, the use of helium and CO2 in welding instead of argon \\$quot;“ have led to a number of ASUs being built with under-sized argon capacity or none at all. The upturn in steel and stainless steel output and increased use of argon in welding has driven demand in recent years to almost outstrip supply leading gas companies to try to squeeze more argon out of ASUs.

However, it is not just the US where there is a tightening in argon supply. In some countries in Europe there is a tight supply position \\$quot;“ Spain, Italy and Central Europe, for example \\$quot;“ and argon is a highly traded product among the gas companies to ensure supplies exist. Meanwhile in the Far East, particularly China, demand for argon is booming and most ASUs there, including captive plants, are now built with argon recovery.

In some countries, there have been times of such desperation for argon that ammonia plants have had argon recovery units added to their purge gas cycle to recover anything between 20 and 40tpd of pure argon to meet the local demand. India is a prime example of this.

So what is causing the upswing in demand?

Boom in steel and stainless steel output
According to the stainless steel company Outokumpu, stainless steel is the fastest growing metal market across the world. This is supported by the International Stainless Steel Forum (ISSF), which revised its forecast for world stainless steel production in 2006 last month. The forum said \\$quot;the revision was necessary after production figures for the first half showed that demand was stronger than expected. Despite high raw material costs there is apparently still a strong demand for stainless steel.\\$quot;

The ISSF is now estimating that 2006 global stainless steel production now stands at 27.8 million metric tons (mmt) of stainless crude steel, up by 14.3 per cent compared to 2005. China and India, the driving forces for the global market, reached crude steel production of 14.7mt this year followed by Western Europe and Africa with 9.7metric tons and the Americas with 3.1metric tons.

Similarly, the International Iron and Steel Institute (IISI) forecasts 2006 to be a strong year for the steel industry with a world growth rate rising from 1bn tons in 2005 to 1.12bn tons by the year end, an increase of nine per cent. Again the steel market has been dominated by Asia and China in particular, forecast to achieve 14 per cent per annum increase in steel use.

There is strong evidence that more argon is being consumed per ton of steel produced. This is particularly relevant to steel companies aiming to improve steel quality and produce higher grades of steel. There is less evidence that the use of argon in stainless steel production is accelerating other than in pure output terms.

Increased steel output in all regions and the demand for improved grades of steel have led over the past five years to a tightening in argon supply to which the gas companies have had to react.

Gas industry invests in new capacity in China and India
The world\\$quot;s steel and stainless steel production needs remain high, and these heavy manufacturing companies keep increasing capacity \\$quot;“ especially in China and India. The industrial gas companies have had to respond.

The new Linde Group, Air Products, Praxair and Air Liquide have all brought new plants and ASUs on-stream in order to respond to the increasing demand.

BOC has signed some significant new contracts in China this year including the formation of a joint venture (jv) with Maanshan Iron & Steel to meet the growing industrial gases needs of Ma Steel in Anhui Province. The jv will initially invest nearly $100m in building and operating two large ASUs with significant argon capacity. They are expected to come on-stream in 2007.

BOC also started operating two ASUs this year at a plant belonging to Taiyuan Iron and Steel Corporation (TISCO), the largest stainless steel producer in the country. This contract increases supply from the ASUs to 2,800tpd of oxygen, and hence the total steel output will rise to eight million tonnes per year.

Air Products signed long-term contracts this year with Tangshan Guo Feng Steel and Tangshan Fu Feng Steel in Tangshan to supply an ASU in 2007. Additionally the company brought on other on-site and merchant ASUs in the country.

This year Praxair has entered into a new long-term agreement with Lianzhong Stainless Steel for the supply of air gases to its stainless steel works. The plant, due for commissioning in the fourth quarter of 2006, will provide a backup supply of merchant liquid argon to the local market.

Air Liquide has also invested in China this year by building a new ASU in the Hangzhou Economic Development Area (HEDA).

In India the current demand for argon is estimated at 200 tpd. Supply and demand has been very cyclical in India, a shortage in the 1990s lead to several ammonia plants building argon purge gas recovery units resulting in over supply. Increased output of steel in the past five years has lead to a shortage with India importing argon from the Middle East and from South East Asia.

India, which represents a significant growth opportunity for industrial gas companies, has been the target of investment by the majors over the last few years. India\\$quot;s steel production capacity is estimated to be 35 million tons per year and is expected to increase to 60 or 70 mtpy by 2010-2012.

At the forefront of investment this year has been Praxair, which has continued its investment from 2005\\$quot;s contract with Hospet Steels. In June the company won a major contract from Tata Steel, which is Asia\\$quot;s first and India\\$quot;s largest integrated private sector steel company. Praxair will build and operate two on-site ASUs at the site of the steel plant in Jharkhand.

The cryogenic air separation plants, each with a capacity of 700tpd, will meet the growing demand for liquid gases from customers in eastern and northern India. The plants will be commissioned by early 2008 in time for the ongoing 1.8 million-ton expansion of the plant.

Praxair India has also been awarded a major contract from the Steel Authority of India (SAIL) to build and operate an on-site industrial gas plant at the site of SAIL\\$quot;s steel plant in Durgapur, north of Kolkata. The plant will be commissioned by early 2008.

Air Products has been active in India this year, announcing a long-term contract between its joint venture INOX Air Products and the Steel Authority of India Limited (SAIL), India\\$quot;s largest steel producer. The contract is for the supply of oxygen, nitrogen and argon to SAIL\\$quot;s steel works in Bokaro, Eastern India. The facility is scheduled to come on-stream in early 2008.

Although significant investment has been targeted in India and China, other regions have also experienced higher steel and stainless steel output and hence higher use of argon. This is certainly true in Europe.

Following Linde\\$quot;s expansion through a supply agreement with the Russian Maksi Group in 2005, the company has been commissioned to build an ASU in the Netherlands for the steel and aluminium producer Corus. The investment, valued at €75m, is being built in the context of the planned increase in steel production, for which the new ASU will supply the whole range of air gases \\$quot;“ including argon.

\\$quot;This is the largest on-site facility of its type run by Linde itself,\\$quot; commented Dr. Aldo Belloni, member of the executive board of Linde.

The new ASU will replace four older Linde facilities and is scheduled for completion in mid-2009. We understand this will have maximum argon capacity. Linde has just recently commissioned a new large complex in Finland as well.

Back in 1997, when Air Products commissioned the world\\$quot;s largest ASU in the Netherlands to supply the Shell refinery (c 4000 tpd GOX), analysts thought it was possibly foolhardy for Air Products to install a maximum capacity argon column in a market in the Benelux that was awash with argon. However, Air Products managed, through trading and investment from AGA, to sell out its capacity within a short period of time.

Overall Europe is well balanced in argon but there are pockets of tight supply within the region.

The Middle East has become an attractive trading ground for gas companies as the fluctuating demand for argon in the region and the lack of any significant presence by the major gas companies has led to huge swings in supply. In the mid 1990s, argon was in short supply, and companies such as BOC, Air Products and Air Liquide exported the gas to the region in ISO containers.

The KOAC Group in Kuwait has recently established a trading and leasing business, Cryo-Rent, to move argon from countries in surplus to those short of the product. The high rise in oil prices in the past two years has led to significant construction activity throughout the region causing a shortage of argon for welding applications as well as for steel output. Global Gases in the UAE is another company very active in trading argon throughout the region.

The steel market is also undergoing strong growth in South America, due to its favourable production fundamentals. One of the companies taking advantage of this opportunity has been Air Liquide, which has achieved commercial success with the renewal and the extension of its agreements with the Argentine steel manufacturer Siderar. Air Liquide has undertaken to deliver 1,900 tpd of oxygen and to supply nitrogen, argon and compressed air by installing a new 350 tpd liquefier at the customer\\$quot;s site. This will supplement the existing installation and will be operational in October 2006.

New uses of argon in the steel sector?
Industrial gas company AGA\\$quot;s head of manufacturing industry, Karl - Ake Orrebo, based in Sweden expects the stainless steel industry to keep growing and remain the key driver in argon sales.

He said: \\$quot;The stainless steel sector is growing particularly well in China and South America and less so in Europe and the US. We will be operating at full capacity for some years.

\\$quot;Although there are some shortages in argon outside of the EU, we are going through good times,\\$quot; he confirms.

But what about the future and new possibilities of argon? Orrebo does not expect any significant new argon applications in stainless steel production as currently argon is mainly used in the purification process of steel in order to remove carbon content from the material. He continued: \\$quot;However, if we go deeper into the stainless steel production process, past the melting stage, there may be some new applications coming up in the cutting and welding processes. Argon could be used whilst making stainless steel plates and strips for example.\\$quot;

Orrebo believes that although argon is also used in the steel production as a tool for cleaning or protecting steel oxidation, this segment is not going to lead to significant new applications.He concludes: \\$quot;Argon volumes grow alongside the stainless steel production output. When steel and stainless steel output increases so does argon use.\\$quot;

Demand forecast for argon
As long as demand remains high in emerging countries, the outlook for 2007 and beyond remains positive for argon. IISI confirms this by estimating that the strongest growth region will again be the North Pacific Rim, led by China, with an increase in steel use from 374mt in 2006 to 413mt in 2007.However, the institute also suggests more moderate growth in the Chinese use of steel. This is partly due to stronger credit control and administrative measures introduced by the Chinese authorities.

Industry analysts, Spiritus Consulting, forecast that industrial gas growth in the metallurgy sector will increase by 8.5 per cent over the next five-year period. This is healthy growth for the industry. However, the consultancy believes that argon demand could double that rate over the same period.

However, new ASU capacity construction across all regions should result in a more balanced supply position for argon as a whole and the significant tight supply situation being experienced by some countries will be addressed over the next few years. The danger in China is possible over-supply but the experience over the past 15 years is that this corrects itself within two to three years.

As long as the demand for improved grades of steel and for stainless steel continues there will be an ever-increasing demand for argon.

Argon production steps
Argon is produced commercially alongside oxygen and nitrogen by using an air separation unit.

Atmospheric air is compressed and cooled using a cryogenic process. After the liquefaction process air is fractionally distilled, based on the principle that each component has a different boiling point. Argon has a boiling point between those of nitrogen and oxygen.

In the distillation process, liquid N2 is the first product to be extracted from the high pressure column. The next stream contains oxygen and argon plus some other pure gases. Once this is extracted, the crude stream contains approximately ten per cent of argon. It is necessary to refine this stream in a separate distillation column, which once processed produces argon of 98 per cent purity.

Manufacturers will further refine the stream by mixing argon with hydrogen, catalytically burning the trace oxygen to water, drying and finally distilling the stream to remove remaining hydrogen and nitrogen. The resulting argon product is of 99.9995 per cent purity, also known as Grade N5.5.

Argon applications
In the welding business, customers need to monitor the content of N2 and O2 in the argon supply. It is important to have an oxygen- and nitrogen-free environment, as their presence can lead to porosity in the weld. In addition, high levels of N2 cause more spatter, leading to poorer welds. Argon is also used as an inert gas shield for metal inert gas (MIG) and tungsten inert gas (TIG) welding. Using this type of shielding allows manufacturers to weld stainless steel to aluminium, magnesium and copper alloys.

In the steel industry, argon is used to displace gas or vapours, preventing oxidation during the processing of the steel.

To create better temperature consistency and homogeneous composition, argon is stirred into the molten steel; argon will also assist in the removal of unwanted soluble gases during degasification.

Argon is also used to flush out carbon monoxide and reduce chromium losses in the argon-oxygen decarburization used during stainless steel refining.

Pure argon has many applications in the electronic industry as it is used as a shield for growing crystals such as silicon and germanium.

In manufacturing aluminium, argon is used to replace air or nitrogen and create an inert atmosphere. It assists in the removal of unwanted soluble gases during degasification; and to remove dissolved hydrogen and particulates from molten aluminium.

Other uses are incandescent light bulbs, with argon replacing the oxygen rich air that corrodes the tungsten filaments, and neon signs.

By Marcus Creaven
AGC Instruments
(AGC Instruments manufactures analysers to analyse impurities in argon matrix gas)