gasworld talks to the President of Chart Asia, Eric Rottier, about the company's rapid growth in China
Chart Asia started out when the Garfield Heights, Ohio, US-based Chart Industries Inc. acquired Johnson Engineering Pty Ltd. near Sydney, Australia to capitalise on large cryogenic tank and trailer demand in Asia in 1996. In the same year it also acquired BOC’s equity stake in a cryogenic tank joint venture in Zhangjiagang, China to supply standard cryogenic customer stations to the Chinese market.
Moving forward, 2001 saw Chart Cryogenic Equipment (Changzhou) Co. Ltd. established. This was a wholly foreign owned entity with a mission to supply liquid cylinders, vacuum insulated pipe, LNG vehicle tanks and helium dewars to the Asia market. This was followed in 2004 by Chart Cryogenic Engineering Systems (Changzhou) Co. Ltd, another wholly owned foreign entity, to supply large cryogenic tanks, lorries, trailers, and vaporisers for the Asia market and as an integration platform for the other facilities.
In 2005 Chart acquired Changzhou CEM Cryo Equipment Co. Ltd, a market leader in China for cryogenic lorries and delivery units as well as a respected supplier of standard and engineered bulk storage tanks. The acquisition provided significant scale for Chart in Changzhou and expanded capacity, as well as adding over 180 skilled employees to the Chart team, which provided a strong foundation for growth. As part of the agreement, Melbourne-based CEM International became Chart’s sales agent for Australia and New Zealand. “The local presence and capabilities of CEM International, combined with Chart’s investments in China, allowed us to capture a large portion of growing LNG and Industrial Gas demand in Australia and New Zealand,” says Eric.
This growth period also included the completion of a facility expansion in Changzhou, followed by the establishment of a commercial office in Shanghai in 2006. In 2007 Chart established Chart Cryogenic Distribution Equipment (Changzhou) Co Ltd, a joint venture to supply cryogenic trailers to the Chinese market. Phase two of the expansion in Changzhou means that Chart now boasts a 23-acre production site and over 30,000m2 of covered production space. All of the company’s China operations are now consolidated at this single campus.
The company’s vision is to be the leading designer and manufacturer of cryogenic equipment, consistently delivering innovation, quality, service, and value to Chart customers.
To get to this leading position, the company works on product innovations that offer a superior competitive advantage to its customers, while becoming a prominent global provider of application-based cryogenic solutions that set industry standards for quality, service, and value. It also strives towards an employee culture of pride and commitment to growth, and healthy long-term business partnerships with customers and suppliers.
Rottier says that in support of these goals, Chart has invested in facilities and manufacturing equipment in China that are on par with the best in class globally, “We maintain safety and environmental standards equivalent to Europe or the US, and we invest heavily in employee training.”
Specific examples of success include localising Chart’s proprietary MicroBulk product lines (ORCA and Perma-Cyl®), its Trifecta® high pressure gas delivery system, liquid cylinders, ultra high purity electronic grade bulk tanks, vacuum insulated pipe, helium dewars, engineered bulk tanks up to 500,000l, and trailers for export around the world. “These product lines differentiate Chart and they have experienced significant growth while the 50 or so other competitors in Asia mostly fight over commodity product lines.”
Over 50% of Chart Asia’s output is exported to South East Asia, Australia, the Middle East, South America, and the US. “The most significant end-uses for our products include electronics, steel production, LNG, glass, chemicals, metal fabrication and healthcare,” Rottier explains. The major gas companies represent the majority of Chart Asia’s demand. “We service the major gas producers with local account managers, regional executives, and global key points of contact at their corporate offices,” he adds. These relationships are further enhanced with Chart’s local agents and Chart Asia Authorised Service Providers. Several of the majors are driving towards global specifications and supply agreements. “Chart is positioned well to meet their global and regional needs given our distribution and storage manufacturing infrastructure in China, the Czech Republic, and the US.”
Chart’s business model encourages collaboration of experience and expertise regardless of the business unit involved. Chart Asia was established as a platform for organic growth and it provides resources to facilitate growth in the Pacific Rim region regardless of the internal organisational structure within Chart.
A good example of this collaborative approach is illustrated by Chart Asia currently working with the Energy & Chemicals Group to add brazed aluminium heat exchanger capabilities in China. These additional capabilities will enhance Chart’s ability to service the Chinese and Asian industrial gas and hydrocarbon markets.
Out of Asia
Emerging growth areas to watch include laser cutting and high-pressure gas applications, bulk CO2 beverage carbonation for fountain drinks, enhanced oil recovery, stem cell research, and distribution of LNG, Rottier suggests. “LNG is being pursued as both a vehicle fuel and a heating source for industrial applications,” he says. In areas where there is no natural gas pipeline, LNG can be distributed via a ‘virtual pipeline’ consisting of trailers and bulk storage/vaporisation systems at the end user’s site.
Mode change is driving gas distribution’s continued evolution in Asia. Historically, there was a large gap between high-pressure cylinders and bulk delivery of gas. “We have experienced an aggressive shift to liquid cylinders and most recently MicroBulk,” says Rottier. “We expect this trend to continue as the cost of distribution escalates. We also see a growing demand for weight-optimised super insulated trailers for the same reason.”
Rottier was recruited by Chart’s CEO, Sam Thomas, who came on board in 2003 to aggressively develop the company’s business in Asia. He became President of Chart Asia, Inc. in early 2004 and set to work developing local capabilities. Since then, Chart Asia has grown from less than 40 employees to over 450 employees today.
“My team in Chart Asia consists of local management that is responsible for the daily business and an operations excellence support team,” Rottier explains. The operations excellence team is responsible for technology transfer and operations development support. It is based in the US but spends significant time supporting Chart Asia.
Rottier indicates Chart’s local organisation in Changzhou is like most foreign companies in China; “They are predominantly young, but very aggressive, intelligent and career oriented. Over 75% of our work force has less than two years of experience with Chart and are less than 40 years old.”
The strength of Chart Asia’s organisation resides in its staff’s determination and the depth of experience available to mentor specific disciplines. The company is also investing in developing its local team. “We have tapped some of the best technology transfer resources in Chart to support our growth in China,” Rottier says. “We amortise this by recruiting local employees that have the capabilities to grow with us.”
MicroBulk is by far the most exciting initiative in Asia, according to Rottier. “Chart has proprietary technology with our ORCA delivery unit and Perma-Cyl® product line,” he explains. “In combination, the ORCA and Perma-Cyl® allow no loss/no vent filling on site.” The Perma-Cyl® has an integrated fill termination device that allows this, and the cylinder can even be filled through a remote wall box. The ORCA delivery unit has a submerged pump so there is no cool down time and its variable speed drive allows a safe and automatic fill and termination. Chart says that the ORCA has the industry leading flow meter in terms of accuracy and robustness, supplied by FLOW Instruments. “We have localised these products in China and have had exceptional response from gas distributors looking to differentiate themselves in the market place,” says Rottier.
Other trends are a growing need for extremely large shop built cryogenic tanks due to the increased challenges of site construction. “We have shipped a tank as large as 500,000 litres and are getting inquiries for much larger tanks,” Rottier says. Chart Asia has in-floor tracking systems for large tank material handling and a very large production hall with two 100 tonne cranes dedicated to this opportunity.
LNG vehicle applications and virtual pipeline is another significant growth area, especially as countries push for cleaner fuels. Korea, Australia, Thailand, China and India are all very active in LNG.
Chart Asia has planned ahead to meet future customer needs. “Given that we recently more than doubled the size of our facility, we could nearly triple the amount of product shipped from our facility with continued staffing and investments in automation.”
Chart strives to achieve premium value by offering the highest quality product within the customer’s required delivery time. To do this, Chart focuses on value-added solutions and system sales that command a higher margin. Chart has also localised many proprietary products as well. On the cost side, Chart has launched a Lean Manufacturing initiative, bench-marking the performance of Chart’s top international facilities. “We work closely with our Global Sourcing group to achieve the lowest cost of materials, leveraging Chart’s volume,” Rottier says. “We are in the process of implementing ASME cold stretching which should provide cost savings by reducing the thickness of the pressure vessel.”
Looking at LNG prices, Rottier says that higher LNG prices will benefit Chart’s Energy & Chemical’s business on the plant side of the equation, as investments should continue to increase. “As for vehicle fuel applications, LNG typically offers 35-50% savings versus the cost of diesel so this should not be impacted significantly as diesel is increasing as well.” Industrial applications using an LNG virtual pipeline are struggling now due to a lack of available LNG.
Chart’s customers have many supply options in Asia – in fact, there are probably more cryogenic equipment companies in Asia than the rest of the world combined. “Chart cannot always be the lowest cost so we need to differentiate ourselves with our customers,” Rottier explains. “We do this by leveraging our global relationships, technology, and products.” Chart works with its customers on a local, regional, and international level. “Ultimately customers support us only if we listen to them and execute on our commitments. Asia is an intense and fast growing market and our customers, like us, are constantly struggling to keep up. If we make our customers’ life easier, our opportunities to grow within an account and in the market place will naturally occur.”
“I think the key is that a gas producer or distributor needs to know their strengths and weaknesses,” Rottier tells gasworld. “They need to capitalise on their technology and market position.” In Asia it is critical that businesses do not over commit, so they must understand their capacity constraints. A strategic footprint is necessary so assets should be deployed or acquired to shore up a company’s position. Cost control is essential given the competitive nature in Asia. “There are opportunities to be the lowest cost provider by investing in higher end technology rather than focusing on sourcing commodities at the lowest price. Gas producers that embrace this, tend to lead in the market place.”
Over the next five years, Rottier believes that we will continue to see growth, even if it moderates slightly. “The industrialisation of the emerging economies, the decline of conventional oil sources, and the desire to reduce greenhouse gases are trends that will drive substantial industrial gas demand.”
As for the evolution of gas companies, Rottier says, “We have experienced changes recently following the Linde acquisition of BOC and the related divestitures of joint ventures in Asia to Air Liquide.” Both Air Liquide and Linde are centralising procurement activities. In the past this was handled on a regional basis. “In Asia I could envisage an improved model of distribution by separating the Bulk and Packaged Gas/MicroBulk businesses. They are really two different businesses and each requires a unique market focus.”
“MicroBulk in particular requires flexibility in adapting new storage and distribution technology as a result of having a diverse range of gas distributors. Innovation will be maximised in those areas with diverse competitors anxious to capture demand. This has been proven in the U.S., European and China markets. Another possibility could be a major gas producer establishing LNG distribution infrastructure.”
And for the future? Chart will definitely be on the acquisition path. “We are actively reviewing regional acquisition opportunities,” says Rottier. “China makes the most sense but other high growth countries in Asia are being considered as well.”