The Chinese New Year may have passed, but the ‘liquid gas timeout’ has still not come to an end.
Amidst the economic slump caused by the battered economies of the US, Japan, and Europe, China stands out as the only major country maintaining a growth in its GDP.
However, along with steel the semiconductor and auto manufacturing industries are all being forced to decrease production, causing the industrial gas market to suffer a sharp blow.
The chronic uncertainty in supply is worrying, and a stop has yet to be put to the plunge in the prices of liquid gas.
Companies have suddenly been hit with dilemmas, being forced to make quick decisions to ensure the safety of their businesses.
Mr Osamu Takahashi, Chairman and General Manager at Shanghai Iwatani said, “Sales suddenly fell into a slump as of the second week of last November. The plunge was greater than had been assumed, and we considered a sudden shutdown of plant operations.”
Japanese firms, many of whom were customers of Shanghai Iwatani, wound up one after the other, shutting down production.
Jiaxing Iwatani Industrial Gases plant, which had been running at full capacity, was forced to reduce its operational ratio – both liquid oxygen and nitrogen plants, which had merchant sales of 3,800 m3/h cut back their operational ratios to 70% as of November, and at the end of January operations were shut down for more than two weeks.
Each year in China, electric power fees rise by around 7%, and now power fees account for 40% of manufacturing costs.
It is because of this that operation at low ratios causes poor productivity, and plants are often shut down during the New Year season in China.
It is common for deliveries to fall off in January and February, because of the Chinese New Year and other seasonal factors. This year however, numerous companies had longer holidays than normal, and even after the New Year season ended, there was no movement of goods.
Although there has been a rapid cooling off since the fourth quarter of 2008, it seems the high growth ratio which was maintained during at least the first half of the year has cushioned the blow somewhat.
The vibrant increase in demand at the start of 2008 caused the majors to go ahead with fast paced plant construction.
This itself has been problematic however, as the original thought behind the construction of new plants by the majors was to alleviate the uncertainty surrounding supply, along with striving to expand their market share. In an ironic turn of events, demand became sluggish at the end of 2008.