A year ago we explored the advancing Asian market and a gases business firmly in the ascendancy.
Industrial gas revenues had risen a further 12% to reach a value of $645m. A heightened sense of optimism was in the air, matching that of peace which had seemingly spread throughout India and beyond.
As we enter February 2009, the picture continues to look bright for the region in the longer-term, if not sullied slightly by the recent global economic woes.
This is a region which is building on the success of recent revenues and sustained demand for gases, boosted by an emerging electronics and solar cell industry.
Before the full extent of the financial crisis and its implications had been calculated, figures suggested further growth in the Asia gases market, which comprises largely of India, Pakistan, Bangladesh, and Sri Lanka.
Gas revenues of $751m in 2007 represent a 16% growth on 2006 and a market positively moving forward, reinforcing the belief that this is indeed a region which will be ready to sit at the top table in the future.
In light of the financial plight around the world however, facts and figures have perhaps not been murkier in recent times. Previous forecasts have faced revisions, while all around have cited a less than certain outlook ahead. So what do we know about the region for definite?
A maturing market
India is by far the largest and most productive country in the region, easily contributing the bulk of gas revenues at $655m in 2007 (Spiritus) and the real driver behind growth in the Asia gases market.
It’s also the nation of which more information is known and a high level of economic activity is reported. The Indian economy has grown at a healthy rate of over 8% for the last three years and despite the global financial downturn, is expected to maintain a high GDP growth rate in the near future.
This high level of economic activity is likely to impart buoyancy in both the business and industrial scene in the country, as a result of which, the gases industry is poised for sustained growth.
Among the many industries experiencing rapid growth in Asia, three key growth drivers appear to be the ‘usual suspects‘ behind the region’s impressive performance. Steel, refining and electronics are the demand-sustaining sectors of the moment in the Asia collective of countries.
In India alone, an increasing number of tonnage opportunities are arising in the gases business as a result of the recent trend of captive users in steel, petrochemicals and refinery sectors, increasingly opting for outsourcing their gas requirements.
The government’s National Steel Policy of 2005 for example, had projected the country’s steel production capacity to touch 110 million tonnes per annum (tpa) by 2020, yet recent developments indicate this projected capacity will be commissioned well ahead of 2020 and the sustained surge in steel demand will continue to benefit the industrial gas business.
Despite fears of a global recession, it’s thought that domestic demand in the country will provide sufficient fillip and resilience to the growth of the economy and core industries.
As this Indian economy matures, such a development augurs well for the gases industry and it is believed that demand for liquid nitrogen will continue to rise in line with similar patterns seen in the developed economies of the Western world.
The specialty gases business is also suggested to be showing impressive growth and with double digit growth in this segment, there is likely to be much focus from the gas community in this area for the years to come.
Relatively new product lines for India include hydrogen and CO2, offering a great deal of promise as a result. Significant growth in hydrogen application processes for example, such as specialty chemicals, edible oils, solar cells and optical fibres, is fuelling growth for merchant hydrogen.
Another relatively new industry for the country is the solar cell and photovoltaic (PV) business, a ‘sunshine sector’ offering significant potential for the gases industry.
While India is not yet a considerable user of solar power, it is increasingly becoming a hub for solar power manufacturers and the last two years have seen substantial investments pouring into this sector.
In terms of other growth drivers, healthcare in India had been a neglected sector for a number of years but in the past decade has witnessed much development. Now closer aligned to western standards than perhaps ever before, the development of healthcare in the region presents a strong opportunity for gas suppliers.
Looking to gain a foothold in this market is Air Liquide, the French industrial gases giant revealing in November 2008 that it had acquired Electrocare Systems through its subsidiary Taema.
The Chennai-based company specialises in medical equipment for respiratory care and the deal represents Air Liquide’s first healthcare acquisition in India – a country with a population of over one billion and experiencing rapid growth in its health needs.
Emerging applications in industries such as glass, oil, fibre optics, and food would also appear to be contributing to the growth of the industrial gas business in India.
An eventful twelve months
It’s been a moderately busy year in the Indian and wider Asian market since we last explored this a year ago.
Both Air Liquide and The Linde Group have moved to secure ever-stronger positions in the region, with the latter most recently announcing a contract to construct a turnkey ethylene plant in Dahej with long-term consortium partner Samsung Engineering.
Prior to its acquisition of Electrocare Systems in November 2008, just months earlier Air Liquide had proudly revealed the purchase of India-based Pure Helium. Incidentally, the healthcare sector with its MRI machines and other treatments is one of the factors attributed to strong helium consumption in the Middle East and India, a market growing by more than 10% per year.
Air Liquide now has a healthy vantage point in this market and although marketing the acquisition as an expansion of its presence in the Middle East, the deal for Pure Helium is also indicative of a strengthening position in Asia’s India gas business.
Which is exactly what fellow leading industrial gas company Linde has been coveting. Through its ownership of BOC India, Linde enjoys a resoundingly strong stance in the Indian and Asian market – a position which the group appears keen to build upon.
BOC India has revelled in profitable, successive quarters and has benefited from ‘strong demand across all business segments’ in 2008, in October recording a gross turnover of Rs 142.37 crore at an increase of 33% over the corresponding 2007 quarter.
Furthermore, in May 2008 Linde reportedly revealed it would be investing around €1bn in its BOC India company over a 7-10 year period, heralding its faith in the buoyancy of this market and citing ‘good growth coming from oil, pharma and renewable energy sectors’.
Such faith in the wider Asian market has also been made evident by Linde, as the parent company of BOC Pakistan Limited. September 2008 saw BOC Pakistan declare an investment of around €900,000 for the installation of a nitrous oxide (N2O) plant at Multan, complementing or supplementing the company’s existing 60 tonnes per day (tpd) CO2 facility at its Multan site.
So while many forecasts and figures are somewhat cloudy towards the future, we’ve established that the Asian market has been growing ever-more competitive throughout 2008 as the two leading industrial gas players shore up their interests in the region.
We know too, that the Indian market has a whole new player altogether – in the shape of India Glycols Limited. gasworld revealed in December (2008) how chemicals and petrochemicals manufacturer India Glycols had entered the Asian industrial gas business, with further expansion plans still in the pipeline.
The company built on its impressive production portfolio and manufacturing facilities in Kashipur, Uttarakhand and Gorakhpur, with the purchase of an ASU from Praxair Inc. for the production of liquid oxygen, liquid nitrogen, and liquid argon.
Furthermore, India Glycols established two beverage grade liquid CO2 plants and so competitive is its offering, that the company has secured an initial two year contract for the supply of high quality CO2 to Coca-Cola India Inc.
As well as welcoming a significant new player to the market, Asia is also to be the home of a new thin-film PV manufacturing site as German firm Signet Solar expands operations.
As a leading manufacturer of silicon thin-film PV modules and a user of industrial and specialty gases, Signet Solar will construct its second production site near Chennai, India – the scene of such a rapidly growing solar cell and electronics industry.
Meanwhile in nearby Sri Lanka, a programme for the exploration of hydrocarbons in the country could soon be underway.
In a country where industrial gas revenues totalled just $13m in 2007, Cairn Lanka Pvt. Ltd. has reportedly entered into an agreement with Sri Lanka’s Board of Investment (BOI) for a commitment of initial investment towards the exploration of hydrocarbons.
It’s thought that the proposed exploration of hydrocarbons would mean an initial investment of around $110m.
Before the financial crisis
So what did we know about the region and its performances before the economic downturn so sensationally hit the globe?
Figures from Spiritus Consulting reflected positively on the region’s gas business in 2007, with the Asian industrial gas industry growing by a healthy 16% as it reached a value of $751m – up from $645m in 2006.
Increasingly impressive numbers for an overall population of just over 1.5 billion in 2007, with a GDP of around or just over $1.2bn. With gas revenues approaching the billion dollar landmark, India is the key performer in this collective of countries and boasted a gas business worth approximately $655m in 2007, an 18% increase from $557m in 2006.
With such high revenues, India also accounts for a huge 87% of the Asia market. Further behind is Pakistan, holding a 6% share of the market and gas revenues of $47m in 2007, having risen 9% from 2006 revenues of $43m.
Also showing 9% growth in 2007 were Bangladesh and Sri Lanka, as Bangladesh amounted to a gases business worth $33m and the Sri Lanka industry reached a revenues value of $13m.
In terms of the major players and their role in the market, Linde is thought to be far and away the leading gases company as it occupies around 24% of the business, just ahead of the independent distributors which account for around 22%. Praxair holds a 19% market share, while Air Products is close behind with a 16% share.
The future – what can we expect? As with many circumstances of late, the outlook ahead is somewhat cloudy.
The gases business is capital intensive and requires large investments in facilities and networks to service bulk volumes at competitive prices.
In India the industry comprises of large captive users in the steel, fertiliser and refinery sectors and a large number of merchant liquid customers, primarily in the metals, glass, automobile, petrochemicals and pharmaceutical industries.
This merchant market has continued to deliver growth on the back of robust growth in end-use segments, where higher development in industries such as steel, petrochemicals and glass has created significant incremental demand for gases.
Such increasing expansion and development is largely being met by ‘Build Own Operate’ (BOO) supply scheme opportunities arising from the trend of captive users outsourcing their gas requirements to gases specialists, while also focusing on core competencies.
The gases industry in this part of the world is poised then, for a significant leap forward on the back of robust growth from various end-user sectors, while opportunities for growth are also likely to arise from an increasing government focus (in India) on streamlining its policies in new application areas such as electronics and food processing.
Besides the boom in construction, India’s automobile industry is seen to be providing a strong fillip to nitrogen and argon demand.