Day one of gasworld’s Europe Industrial Gas Conference has drawn to a close here in Düsseldorf, Germany, after outlining the main industry drivers in Europe as well as delving into the hot topics across the continent.
Over 180 delegates from 28 countries gathered at the Hilton Hotel in the heart of the city, discussing and examining ways in which to carve out growth across Europe.
No less than seven keynote speakers gave engaging speeches throughout the day, covering a vast array of subjects, from why innovation is essential and the rise of digitalisation, to burning safety issues and investment insights.
gasworld founder and CEO John Raquet officially opened the conference stating, “I would like to personally thank you for travelling from as far away as the US and Australia as well as locally, and I extend a warm welcome to everybody. I hope you not only enjoy the conference and the pleasant Düsseldorf surroundings, but return home richer in knowledge and with new contacts, friendships and business.”
Setting the scene
Under the theme of ‘Carving Out Growth,’ the first session of the event set the scene for the industrial gases industry as a whole in Europe and underlined the key industry sectors driving growth within the continent.
Dr. Michael Glashke and Dr. Claus Benkert, Directors of global consultancy management business McKinsey & Company, were the first to take to the stage. With a focus on performance and growth as drivers for value creation in the industrial gas sector, they explained the main industry drivers in Europe.
Glashke focused initially on the struggling steel sector and simply stated that, in this sector, “The party is over.” He went on to say that, “In Eastern Europe and the Middle East and North Africa (MENA) regions, there is expected growth in the sector of around 5%, but of course these are very low volumes. And unfortunately, there will be rather flat developments in Western Europe where the big volumes are.”
Big data with micro market analysis…is the key industry driver to create value and leverage new technologies
Dr. Michael Glashke, McKinsey & Company
On the other hand, and although the lights might be out in the steel industry, Glashke explained that, “If you dive into the chemical sector; there are opportunities.” Highlighting the growth shift from Europe to China over the past decade and the necessity for performance intelligent management in order to pull this focus back, he explained, “Predictive maintenance and digitalisation will help to drive performance. You need to think about how to manage performance a further optimise for a solid profit level. There are long standing technologies that many of you have already implemented, but intelligence in the system is a big opportunity that could drive value in the industry.”
“Big data with micro market analysis and bringing insight to your sales reps could lead to a 33% increase in volume – this is the key industry driver to create value and leverage new technologies,” he concluded.
gasworld’s lead Business Analyst, James Barr, then gave a comprehensive market update of the European industrial gas industry, with lower energy prices and stifled demand underpinning a flat growth rate in 2015. Despite these challenges, a small growth increase of 1% in 2014 brought the total, global industrial gases market value to approximately €71bn ($80.5m).
Answering the conference theme of ‘Carving Out Growth,’ Barr indicated, “We all know there are a number of challenges – the commoditisation of gases by end-users has become the norm, especially within the tonnage business, and application development is, of course, another challenge. Additionally, global end-user supply and demand, namely within the global steel industry, has and will continue to impact growth.”
“The industrial gas business does remain resilient, but we are in a period of low growth. We have to expect lower growth rates through to 2020, although in Eastern European countries there are more possibilities, with a predicted growth rate of 4-5%.”
“But the major gas companies must lead the way, especially with environmental initiatives and application development.”
Next, a presentation from Tim Jones, Managing Director at Deutsche Bank, gave an insight into the investment view and how Europe’s industrial gases industry is perceived by the market’s key investors, corporations and consultants.
Jones stressed, “The investment process is complex, so it’s important to have a simple message. In a nutshell, there has been a stepdown in growth and a very slow response by companies from a capex perspective. It looks as if the industry is still putting in the same amount of capital but not getting as much growth.”
“Equity investors like the structure of the gas industry – it’s a big premium. But share prices, multiples and confidence has de-rated heavily in the last couple of years. It is not an industry that investors have fallen out of love with; it’s just less loved than it used to be,” Jones emphasised.
He then detailed what companies in the industry need to do to create more value for invested shareholders on the back of stalled EPS growth and struggling share prices, which again referred back to the distinct lack of resources for R&D budgets. He described, “Basically, you need to increase the focus on internal growth – the macro will remain subdued for some time so R&D leverage and increasing the focus on internally driven growth will create more value.”
The hot topics
Following a delicious lunch and networking opportunity, delegates reassembled in the afternoon for Session Two, examining hot topics with a strong emphasis on updated regulations and safety concerns.
The Linde Group’s Managing Director of UK, Ireland and Africa, Sue Graham Johnson, kicked off the afternoon’s proceedings, with a fascinating presentation centering on why research and development is crucial to industrial gas corporations in order to carve out growth.
“Markets are changing, customers and the way in which we communicate is changing. In a digital connected world, innovation becomes the norm.”
The potential is to integrate technology into what we do, so we can offer the customers what they need before they actually know they need it – this is the big opportunity with digitalisation
Sue Graham Johnson, The Linde Group’s Managing Director of UK, Ireland and Africa
“We are seeing technology substitution as opposed to well-made manufacturing operations. The potential is to integrate technology into what we do, so we can offer the customers what they need before they actually know they need it – this is the big opportunity with digitalisation.”
Johnson highlighted that almost 50 billion connected digital devices will be in circulation by 2020, according to a survey conducted by CISCO, which will generate around $8 trillion from digitalisation. Johnson reflected that this will propel the industrial gases industry into a phase of digitalisation innovation, “Growth across the industry might only be 4-5%, but layer these technologies on top of it and it will accelerate everyone’s base business.”
“We can innovate at virtually every stage of the value chain: production and storage, distribution, H2 fuelling stations, infrastructure – we can still develop. But we need convenient and cost-effective technologies. How do we manage industrial gas businesses where we need predictability and consistency, but still integrate all these technologies and capability to create new solutions? We can successfully marry these two – create new value for ourselves and become a truly compelling industry for our customers,” Johnson concluded.
Distributive LNG was also highlighted as a major up and coming area for development, with Chart Europe’s LNG Systems Sales Manager, Jan Kurel, stressing, “LNG could be a good way for traditional air gas companies to consider expanding or establishing new business sectors.”
“The air gas market is subjective, the business is relatively flat and growth in general is very slow – marginal, if at all. It is a flat sector, with well-available gas sources and no further development in terms of gaining new business. That is why you should go for LNG.”
Again, echoing the theme of the conference and targeting ways in which to carve out growth, Kurel urged, “There are synergies between air gas and LNG business structures and it’s a traditional infrastructure. It’s a relatively new and fast growing market and there are new applications which are gaining market shares.”
“I believe, and Chart believes, in LNG – it’s now and it’s good for our environment. It can be an opportunity to expand your business, find a new client base and find something new. LNG is further business growth and a new market segment,” he concluded.
The final two presentations of the day then concentrated on rising safety issues across the continent and the new regulations being put in place to help combat these concerns, namely the newly implemented Psychoactive Substances Act 2016.
Following a speech by Phil Brickell, General Secretary of the European Industrial Gases Association (EIGA), in which he brought home the importance of EIGA’s relentless safety and regulation legislation across the industry, Doug Thornton, Chief Executive of the British Compressed Gases Association (BCGA), then honed in on recent gas abuse trends causing concern and highlighted the significance of the Psychoactive Substances Act 2016, “It is a law that the BCGA proposed around four years ago and we are very pleased that it has come into force. Gases are extremely useful to the world, and our mission is to make sure they are handled safely and properly.”
Delegates will enjoy a fine dining and networking evening, sponsored by Platinum Sponsor Herose GmbH, tonight before exploring the region’s solid growth drivers and emerging innovative technologies during day two of the conference tomorrow.
Aldo Belloni, recently retired member of Linde’s Executive Board, will be sharing his esteemed insights with delegates at Herose’s Conference Dinner in an after dinner speech – a first for gasworld conferences.
Stay up-to-date with all the latest news, views and developments at the Europe Industrial Gas Conference 2016 via the gasworld website, updated throughout the two-day event.
gasworld will also be tweeting live updates during the conference, which you can follow on Twitter using the hashtag #GWEUROPE16.
A full review of the conference will be published in the upcoming August edition of gasworld magazine.