As a New Year gets underway and the global marketplace is as uncertain as ever, gasworld explores the carbon dioxide markets around the world with Advanced Cryogenics’ Sam A. Rushing.
Developed economies often represent mature carbon dioxide (CO2) markets. This would include North America, the UK, Western Europe, and Japan. Developed markets often follow growth of about 3% annually; this is typical of strong economic times. However, we are now in the midst of an economic downturn and this downturn may have a negative effect on the CO2 markets.
This 3% annual factor can sometimes be an average value, when considering a flat to 1% growth factor in the beverage industry, perhaps balanced by a higher growth segment via gas well stimulation, dry ice blast cleaning, and cryogenic freezing markets (for example) on the other extreme of this range.
Developing economies, sometimes representing less mature CO2 markets such as many Eastern European, Latin American, Asian, and African markets, are sometimes soft drink volume-driven.
There are exceptions to relating developing economies to immature CO2 markets, such as Brazil, which is fairly well diversified. However many developing markets, due to lack of infrastructure, CO2 by-product sources, and industry sufficient to support a broad range of applications; can sometimes be driven largely or fully by the beverage carbonation, fire abatement, and cylinder gas consuming industries.
Some developing markets may experience dramatic growth due to new CO2 sources developing, such as today’s ethanol industry bringing in by-product not available before, or if an aggressive gas company happens to open a source of CO2 and develop such markets, then this can make a radical difference.
The global economic crisis may have a bearing on these developing markets for CO2, in terms of less investment in new plants and technology. When looking beyond the downturn though, the future appears brighter when considering the development of new plants in undeveloped markets, leading to new applications for the product and more consumption - when the commodity is more affordable.
What we may see for 2009 and beyond
Traditionally, on a global basis, carbon dioxide growth is often defined in ‘not to exceed’ terms of about 3% per annum. This can consider the lion’s share of market consumption occurring in the developed economies, which are known for expanding the market base through a wide variety of applications.
In some sectors, such as during 2007 and into 2008, many regions which have utilised CO2 in natural gas well stimulation projects – often referred to as so-called ‘frac’ usage, grew well beyond this 3% rate. On the other hand, in the same developed economies beverage carbonation grew (in many cases) at a negligible rate, that being from flat to 1% at best.
As for what has been noticed in the developing economies, as mentioned above, this small market has often been driven by beverage carbonation - sometimes on-site CO2 combustion operations. This process of burning hydrocarbons for the CO2 combustion plant is an extremely expensive means of producing CO2, thus supporting extremely expensive pricing for the commodity.
If developing markets happen to acquire an enriched CO2 by-product source, such as from the global development of the ethanol trade, then new and significantly sized and competitively priced markets can unfold; assuming a gas company or aggressive principal should take advantage of such a position.
Much of what to expect is partly driven by the economic woes, and if such economic woes exacerbate circumstances found in many of the larger CO2 consuming industries in a corresponding manner. For example, given the retail consumer’s potential to shop for cheaper food and beverage options today more than before, perhaps the cheaper priced store brand carbonated beverages will grow and the brand-name products will decline.
This would make for a wash in volume, with little gained or lost. Such a trend during a strong economic downturn may lead one to conclude that lower-cost frozen products will grow too, compared with the more expensive products and in the end, the results will be somewhat mixed.
These results are driven largely by the applications for CO2 taken into context with the products produced and the markets served. In a food processor setting for example, if some IQF (individually quick frozen) products are strictly price driven then perhaps in some cases, cryogenic freezing will drop in favour of a usually cheaper mechanical freezing option.
On the other hand, cheaper protein sources include chicken rather than beef, and the poultry markets are huge consumers of CO2, and this food processing-related sector could grow, replacing other areas of loss for cryogenic freezing or cooling. Many applications in the food industry are simply not replaceable. When speaking of CO2, that being beverage carbonation, CO2 snow and dry ice applications in grinding of meat products, plus the use of CO2 in municipal water systems, for example.
These areas may not be affected by the economic downturn and as mentioned before, a shift to the commodity or store brand style of packaging and selling food products may replace some of the private label products - which in the end, may not result in a loss of CO2 sales to certain sectors.
Under times when economic expansion is taking place globally, on average, one may predict a merchant CO2 growth factor of 3% or less per annum. Specific to the region of the world and markets served, this number varies. For example, if natural gas production is on the rise and CO2 is readily used for well stimulation – this has proven to yield larger growth in the years past for specific regions.
The same may be specific to new CO2 sources entering viable markets for numerous applications, that being new to carbon dioxide; however, this represents few in number globally.
The year ahead may be challenging with respect to maintaining current day loads on plants with current customers, however many applications will not decline. A shift to cheaper downstream consumer products being manufactured with the same carbon dioxide may be the case, and may notice some growth during these economically feeble times.
I know of numerous projects planned ahead for carbon dioxide, which in net terms are an addition to the developed and developing world markets. If we have incremental drops in various food, beverage and industrial producing sectors which use CO2, this would manifest in a drop in corresponding CO2 usage. On the other hand, growth markets continue to persist on the environmental front (such as blast cleaning, plastics manufacturing, and carbonic acid), hence the end result may prove to be a positive volume gain for 2009.
As for the term ahead beyond the economic downturn, the developing markets are continuing to place new merchant plants from a variety of sources, which in turn precipitate new applications for the product. As for the developed markets, the trend (years) ahead is very positive as well. However, the only question in my mind is the ultimate effect of the economic downturn and its impact on the markets.
About the Author
Sam A. Rushing is president of Advanced Cryogenics, Ltd., a CO2 and cryogenic consulting firm which is celebrating the 20th anniversary of the company. Mr Rushing is a chemist, and a consultant to all forms of CO2 projects, including all technical and business aspects of the industry.