The financial results of the gas majors for the fourth and final quarter brought a busy 2007 year to an end in the Western Europe market, heralding the start of a promising 2008 ahead.
This already developed and established industrial gases market was valued at around $14bn in 2005, rose by 9% to reach $15.4bn in 2006 and showed further consolidation in 2007, with estimations from Spiritus Consultancy that suggest all the major gases groups experienced growth of steady percentages - in-keeping with year-on-year progression since the turn of the Millennium. Initial estimates predict that this trend could continue for several years yet, through to 2011 at least.
The two leading industrial gas players in the world today, Air Liquide and The Linde Group, both dominate the Western Europe market and continue to consolidate their resolute positions as expected. Indeed it is these two giants, as the markets squeeze and tighten between them, that provided perhaps the largest degree of activity in the Western Europe region last year.
A number of projects and plans for investment have been announced in Germany in the past 6-12 months, with the country enjoying a sustained period of interest at present. German gas revenues rose almost 10% in 2006 to reach close to $3.2bn and activity in the country is rife.
As recently as late January this year, Air Products announced an agreement with Signet Solar Inc. to supply turnkey installation of gas delivery systems and services for a new thin-film photovoltaic (PV) module production facility in Mochau, Germany. The agreement includes the supply of hydrogen, helium, nitrogen and argon, as well as specialty gases such as silane and nitrogen trifluoride (NF3).
Scheduled to be on-stream as early as the summer of 2008, the plant and turnkey agreement is believed to be a sign of Air Products’ safe and reliable supply to the P+V market.
Corning Painter, Vice President and General Manager of Electronics for Air Products, commented, “We are delighted to have been selected as the gas supplier to Signet Solar and are confident that our expertise in turnkey gas delivery solutions will be invaluable in the safe and effective start up of Signet’s new facility in Mochau.”
Posting promising figures of double digit growth in its recent 2007 financial statements, The Linde Group announced facility expansions in October 2007 with a total investment of €60m in its native Germany. The group declared that it had officially commenced operations at a second hydrogen liquefaction plant capable of producing up to 3000 litres of liquid hydrogen per hour, while also announcing the start up of operations at a new air separation plant at its chemical site in Leuna. The plant has a capacity of 33,000 cubic metres of oxygen per hour and will also produce argon and smaller quantities of other noble gases.
Speaking at the time of the announcement, Dr Aldo Belloni, Member of the Executive Board of Linde AG, commented, “With these facilities we can offer our customers greater supply capacity, a broader product portfolio and even greater product purity.”
Also firming up its position in the surprisingly healthy German market, Air Liquide has made notable new forays in the country of late as it continues to rival Linde as the leading industrial gases supplier.
The French giant has recently announced investment of almost €60m in the Ulm region, reinforcing its supply network for industrial gases used in a variety of processes. Air Liquide Deutschland GmbH is to set-up one of the largest units in Germany for the liquefaction of nitrogen, oxygen and argon gases, enabling the group to accompany the growth of its customers in Germany. Klaus Schmeider, Senior Executive Vice President of the Air Liquide Group, noted, “Our investment in the South of Germany is an integral part of our expansion strategy in order to meet the increasing needs of our customers and to further develop our range of products and services for the key industries.”
Capable of producing approximately 700 tpd of liquefied gases, the unit is expected to be ready by the end of 2009.
Air Liquide has also won a 10 year contract in the field of the solar industry, for the supply of specialty gases including nitrogen, hydrogen and helium to German solar panel manufacturer Sunfilm AG. The company will supply gases and services to Sunfilm AG’s first major thin-film solar plant under construction in Grossrohrsdof, with the contract falling under Air Liquide’s ALUX turnkey specialty gas solutions for the solar industry.
Adding to the competitive edge in the German market and catering predominantly for the small to medium scale businesses, Stefan Messer’s newly formed Gase.de GmbH has officially been launched and announced a major new investment in the country. Up to €10m of investment was believed to have been poured into the start-up of facilities and associated costs, while in December the company announced the investment of €35m in an air separation plant in Siegen. To be built on the site of stainless steel producer Deutsche Edelstahlwerke GmbH, the production facility is expected to supply a total of 15,000 cubic metres of liquid gases per hour, as of autumn 2009 onwards.
Gas revenues in France rose by 8% to reach $2.5bn in 2006 and native Air Liquide has declared plans to increase its gases production capacities in the region in the coming years.
Boasting strong sales performances for the fourth quarter of 2007 and another year of healthy revenue growth, estimates suggest that Air Liquide is set to continue with steady progression through 2008 and 2009, when a number of projects are also anticipated to come on-stream in France.
The company has recently signed a 15 year contract with ArcelorMittal for the renewal and extension of oxygen, nitrogen, argon and compressed gas supply requirements at its Dunkirk and Mardyck sites, Nord-Pas de Calais.
As well as investing in a new ASU with a production capacity of 1,100 tpd of oxygen to cater for this demand, Air Liquide is also due to put a new ASU into operation at its existing site in Fos sur Mer, Bouches-du-Rhone, France. In order to meet the region’s ever-growing industrial demand in air gases, the ASU will have a capacity of 1,100 tpd of oxygen, nitrogen and argon.
Guy Salzberger, Vice President of European Operations and Member of the Executive Committee, Air Liquide Group,commented, “These new investments respond to the high demands of the clients, who include steelmakers, refiners and chemical companies. They are part of the policy of Air Liquide, which will invest around €2bn each year between 2007 and 2011.$quot;
Air Liquide is still the biggest player in the French market with a power share of 71% or $1.7bn and is in fact the largest player in the Western Europe gases markets (based on 2006 figures), with the exception of the UK and the Scandinavian group of countries – where rival company Linde is in pole position with a 57% market share and the equivalent of $710m.
Comparable with both the German and French gases market, UK gas revenues also rose 8% in 2006 to reach a value of $1.9bn and incrementally higher than its 2006 GDP of just over $1.7bn.
Perhaps the most notable developments in the UK market have occurred as a result of the fallout of the acquisition of the BOC Group by Linde back in 2006. As part of the deal, an antitrust ruling by the European Commission enforced the divestiture of Linde Gas UK to Air Liquide for $138m, almost doubling the French company’s UK activities in the process. Around 30% of the acquired activities are in the medical gases and healthcare services industry, which Air Liquide perceives as a key growth driver and had not previously been involved with in the British Isles.
Linde Gas UK achieved sales of $79m in the 2006 financial year and at the time of the deal’s announcement, Benoit Potier, Chairman of the Air Liquide Group, said, “This acquisition reinforces our position in the UK and….gives us access to the UK hospital and homecare markets and strengthens our existing industrial merchant activities.”
While Air Liquide profited then from the acquisition of BOC, The Linde Group itself has also built upon its leading position in the UK market and most recently signed a long term supply contract for industrial gases with international steel producer Corus. Achieved through its wholly owned subsidiary BOC, the €80m agreement involves the construction of a new air separation unit at Corus’ Scunthorpe site in North Lancashire and demonstrates the group’s belief in the UK steel industry.
The new ASU will have a capacity of 1,600 tpd of oxygen and is expected to go on-stream in mid 2010, with BOC Managing Director Mike Huggon commenting, “I am confident that this major contract and the investment we are making will bring long term benefits to both our companies and demonstrates our faith in the longer-term future of the steel industry in the UK.”
The Italian industrial gases market reported a return to higher growth in 2006, rising 9% to reach $2.1bn, and initial forecasts estimate that a similarly steady percentage of growth could be expected for both 2007 and 2008.
Recent project developments include the completion and opening of the VRV Group’s new cryogenic pressure vessel production facility in Burago, and the award of a gas supply contract for Praxair’s Italian subsidiary Rivoira SpA.
Rivoira has been chosen by Silfab SpA as the supplier of gases, gas equipment and gas management services for Silfab’s solar grade polysilicon manufacturing facility in Borgofranco d’Ivrea, providing the on-site supply of gases as well as gas delivery equipment for the entire project. Manufacturing is expected to begin in the third quarter of 2009.
Comprising of the Netherlands, Belgium and Luxembourg, the Benelux is a relatively quiet area for industrial gas activity, though its revenue rise of 12% in 2006 suggests this could be a region of potential in the wider Western Europe market.
The Netherlands is still thought to be the leading country here and itself grew by 13% in 2006, which appears favourable considering its estimated population for the year of 16 million. Neighbouring Belgium also displayed a 12% rise in revenues, marginally behind the Netherlands with a market valued at $814m in 2006.
Similar to the Benelux, Scandinavia represents a proportionally minor share of the Western Europe industrial gases market and showed stable growth of 9% in 2006.
Sweden is still by far the largest gases market in Scandinavia, valued at $475m, though opportunities continue to be explored elsewhere and Norway offers fertile ground for development.
Norwegian firm Yara International ASA recently reported strong financial results for the fourth quarter of 2007, due in part to strong volume of growth for both fertilizer and industrial products, and a gain on the establishment of the newly approved Yara Praxair joint venture.
Praxair acquired a 50% stake in Yara’s industrial gases business, completed on 30th November 2007, and the new joint venture will operate under the name Yara Praxair AS, based in Oslo. The intention of the JV is to jointly develop opportunities in the emerging industrial gases sector in Scandinavia.
Also pertaining to the Norwegian market, production of LNG has begun from Melkoya Island, near Norway, the facility for which Linde has a contract worth around €900m.
Austria and Switzerland
Messer is increasingly active in the industrious Swiss sector, valued at $344m in 2006 and exhibiting growth of just 4%.
Having announced the acquisition of a 51% stake in Switzerland’s ASCO Carbon Dioxide Ltd, the company will assert itself as a leading player in this market and the CO2 technology business.
Messer is also involved in another aspect of activity in Switzerland, having been selected by the European Organisation for Nuclear Research (CERN) to supply helium to the world’s largest particle accelerator, the Large Hadron Collider (LHC) – further signs of the group’s capability to attend to the largest of customer requirements.
The LHC is the largest proton and ion accelerator of its kind and built to study the building blocks of matter, with the Messer Group, through its Swiss subsidiary Messer Schweiz AG, tasked to supply 160,000kg of helium required for cooling the LHC’s 2500 superconducting magnets.
The Austrian industrial gases market displayed growth of 5% in 2006 to reach revenues of around $320m. The Linde Group has continued its investment in the country and collaboration with customers in the area, entering into a long term supply agreement with Austrian steel producer Voestalpine to deliver industrial gases to its Linz production site. The contract amounts to an investment of €62m and involves the construction of an additional air separation plant, to be managed by Linde Gas Austria.
Developments in the Iberian Peninsular throughout 2007 included the expansion of Air Liquide in Portugal, Messer’s investment of €40m in an ASU in the province of Tarrogona in Spain and the announcement that Messer had also made Messer Carburos its own wholly-owned subsidiary.
Reinforcing the company’s Portugese presence, Air Liquide renewed trade agreements with its partners in the country and a total investment of €230m has been announced between the three partners to expand operations in the south of Porto.
As well as its new Tarragona ASU project in Northern Spain, the Messer Group has acquired its competitor Air Products’ shares in Messer Carburos and as a result the business is now a wholly owned subsidiary and will be renamed Messer Iberica de Gases. The acquisition of the shares is part of the group’s strategy to invest in its core markets of Europe and Asia and further underlines its position as the leading independent, privately-managed industrial gas producer.
Addressing helium in West Europe
Dominion gas announced investment of £2.5m in February to secure additional assets in support of its projected growth plan in both the UK, and internationally, with the deal including the purchase of a number of helium transport tankers.
In light of the ongoing concern over helium supply shortages, this will provide Dominion with increased flexibility to collect and deliver liquid helium supplies and also ensure it preserves its supply chain volumes.
LNG in Norway
Europe’s largest LNG plant can be found at Melkoya Island near Norway, which is also the most energy efficient plant of its kind and seen as a valuable project involvement for Linde.
Production of LNG from the island has started and Linde has been responsible for the engineering, procurement and construction assistance, with the contract worth around €900m in its entirety.
LNG produced is transported to customers throughout Europe and the US, while CO2 is separated from the well stream and minimizes the emission of CO2 from the plant.
Dr Aldo Belloni commented, “Both from a technical as well as from a strategic point of view, Melkoya is a valuable beacon project for Linde.$quot;