After just over a decade in business, some might be forgiven for being unaware of the young and upcoming independent that is Suzhou Jinhong Gas.
But with the Huangdi County-based gases company thriving on a combination of increased liquid demand and opportunistic mergers and acquisitions (M&A), Jinhong Gas is a name that’s firmly in the ascendancy.
The Chinese gases market is a competitive business, dominated not only by the Air Liquide’s, Air Products, Linde’s and Praxair’s of this world, but also the robust independents – estimates suggest between 55-65% of the local market is accounted for by independent gas producers & distributors. And yet, Jinhong Gas is fast carving out an impressive name for itself.
Ever since its inception in October 1999, the company has rapidly built on a series of platforms for progressions in its native market. Its credentials are without doubt too; Jinhong Gas manufactures and supplies an array of gases and is already regarded as one of the largest local gas companies in the East China region.
In an exclusive interview of the month with gasworld magazine, Managing Director JIN Xianghua describes the story so far, “Suzhou Jinhong Gas Co. Ltd was established in October 1999 and is located in the Panyang Industrial Zone, in the Huangdi County of Xiangcheng District of Suzhou City. We specialise in the manufacture and sale of liquefied gases, high purity gases, mixture gases, medical gases, specialty gases and the recovery and purification of carbon dioxide (CO2).”
“The registered capital of the business is RMB 60m (US$9m approx.) operating with around 500 staff. The total asset is more than RMB 300m and Jinhong Gas is one of the largest gas suppliers in the East China region. We are recognised as a high-technology enterprise of the province.”
Jinhong Gas, we’re informed, also currently holds the Presidency of the Suzhou Industrial Gas Association and is Vice President of the Jiangsu Province Gas Industry. It’s a reputation steeped in success, despite a relatively brief history so far – and you get the impression there’s still more pages to be turned in this particular story.
So what’s the formula behind the achievements of Jinhong Gas to date?
As our interviewee explains, the Suzhou City independent has carefully climbed the ladder through a combination of increasing demand for the gas and liquid product, and some strategic M&A activity.
“During 10 years of development, we have experienced the growth from a small company to a large enterprise and from weak to strong accordingly. In 2003, the enterprise established the Suzhou Industrial Park Jinhong Gas Company Limited and built a liquid ASU of 3000 Nm3/h with a fund of RMB 50m, and started the liquid production business of Jinhong Gas in the Suzhou area – marking a big leap in quality,” Xianghua says.
“In addition, 2003 also saw the company invest RMB 17m in setting up a hydrogen generation plant and start the production of high purity hydrogen to 99.9999% purity, as well as high purity oxygen to 99.999%. This has both enriched the product portfolio of Jinhong Gas and introduced high purity gas production into the Suzhou area.”
“As a result, we have satisfied the demand for such high purity gases in the East China region.”
“Then in 2006, we invested in a CO2 recovery project to alleviate air pollution and turn this greenhouse gas into a usable resource. At the same time, we built our first food-grade dry ice slice production line and maximised the application of this CO2 resource. On this basis, we established Xuzhou Jinhong Carbon Dioxide Technology Development Limited, with an annual production of 300,000 tonnes.”
In 2009,” 35 year-old Xianghua adds, “the enterprise signed a cooperation agreement with Shanghai Taiyo Nippon Sanso for helium supply on a scale of 100,000 cylinders, giving us an advantage in resources. In 2009 we also started the research and industrialisation project of electronics-grade high purity ammonia (to a purity of 7N), and we expect to start production in October 2010 with an annual production capacity of 1500 tonnes of high purity ammonia.”
“By then we will end the monopoly of supply of 7N high purity ammonia by overseas supply. This is also very important in improving the structure of the industry.”
So 2009 was a key calendar year for the Jinhong Gas enterprise then? Even during the dark days of global recession and cost-cutting, the company continued to move forward and expand its operations.
Our esteemed interviewee agrees and affirms, “Overall 2009 was a key year, as the company underwent a thorough transformation and established two other branch companies and two other subsidiaries, namely the Wuzhong branch company of Suzhou Jinhong Gas Co. Limited, Wujiang branch company of Suzhou Jinhong Gas Co. Limited, Suzhou Industrial Park Jinhong Gas Co. Ltd and Xuzhou Jinhong Carbon Dioxide Technology Development Co. Ltd.”
Xianghua himself enjoys a flourishing reputation. Social duties include the aforementioned role as President of the Suzhou Industrial Gas Association, Vice President of the Jiangsu Province Gas Industry Association, and Committee Member of the 2nd Political Conservative Conference of the Xiangcheng District of Suzhou City.
And at the helm of Jinhong Gas as Managing Director, having joined both the company and the industry 10 years ago, Xianghua presides over ambitious plans for 2010 and beyond.
“For us, 2010 and 2011 are two critical years for the development of the company and we have the following development plans: From 2010 to 2011, to realise growth at a rate of more than 50% in our sales revenue; To increase input into the research and development of specialty gases, building platforms for industrialisation and to lead in the technology improvement in specialty gases; And through the standardisation of the operation in the enterprise, we look forward to our launch in the domestic capital market.”
“Enhancing the management of regions, we will develop further the cylinder gas business in nearby areas to improve our market share – setting up the logistics platform for liquids and encouraging cylinder gas customers to change to liquid,”
“We will also form a long-term cooperative relationship, develop the market for CO2 and specialty gases, expand our market share, improve the market competitiveness of our products, and consolidate the current business model. An important target in the coming years will be to develop the large-scale onsite gas generation business and realise a breakthrough in the onsite gas business.”
A new chapter
The company has a number of projects either complete or underway as it strives to meet these bold objectives.
With China as a country also in the midst of transformation and keen to realise its own potential, the script is ready for Jinhong Gas to embark upon its next illustrious chapter.
This includes the construction of a new plant site for the filling of oxygen, nitrogen, argon, helium, mixture gases, dissolved acetylene and other specialty gases, with construction works for the plant room and working area of 64400m2 now complete, we understand.
Xianghua explains that another 7700 m2 site is allocated for the ultra high purity ammonia project and is expected to be commissioned by October 2010, while another facility is planned for a hydrogen-from-natural gas project and is expected to be commissioned by January 2011.
Looking ahead to a new chapter in the story of Jinhong Gas, he adds, “The Chinese government has realised the importance of transformation and upgrading of industry. A new round of elimination and consolidation of the industry will soon start, with the new energy and technologies leading the development of the gas industry.”
“Traditional gases such as oxygen and acetylene will not see major growth whilst nitrogen and specialty gases will have considerable growth prospects.”
So what’s the secret for Jinhong Gas? Is it really down to a combination of demand and opportunistic M&A activity, or is there more to it? Xianghua tells us, “Jinhong Gas is now one of the leaders in the [China] gases industry, due to continuous innovation in technology, products, management and development, and we are leading the gas industry in Jiangsu province to go forward.”
“The aim of the company is to establish a ‘national brand’. The company set out different development targets at different stages of development, and we happened to grab these development opportunities and improve our competitiveness. We paid a lot of attention to quality at the first stage, during the establishment of the company, and we installed the best equipment with limited capital – thus laying a firm foundation for long term development.”
“During the second stage, we set up the operation network in the Suzhou area, through mergers and acquisitions, and the company grew rapidly. For the third stage, we pay attention to commitment in research and development of technology, developing new and high-technology products, especially added-value specialty gases.”
“Jinhong Gas,” he continues, “now represents good quality and reputation; we are well-known in the market with good customer recognition.”
What’s next for Jinhong Gas, we ask? It’s clear that this budding young company has come a long way, in a short period of time. Further still, the enterprise has a number of projects recently completed or underway and operates towards a defined, concise set of targets.
Completed construction works at its new plant site, coupled with additional projects scheduled for commissioning in October and January respectively, are proof of this progress.
When asked if there were any more surprises up the sleeves of Jinhong Gas, Xianghua simply replied, “High added-value specialty gas products. Onsite gas generation projects of the right scale are under negotiations too.”
Not content with its respected position locally, the company is also focusing on future outreach into neighbouring markets when the time is right, we’re assured.
“We do not have any export business at present and we would look for cooperation and development with suitable customers, forming strategic alliance relationships. Carbon dioxide will have the potential for export.”
As the story so far approaches its concluding prose, Xianghua is in positive mood about the new chapters ahead for the Suzhou City company. Bringing our interview to a confident end, he says, “Jinhong Gas recruits good quality people and sets up a solid career development platform. We increase the commitment in research and development and introduce high technology and new products.”
“We also strengthen cooperation to complement each other’s strong points, an example being our cooperation with TNSC.”
“From the view point of the enterprise, these three factors drive the current high growth. With the economy of China developing continuously in the background, and the gas industry in China on the rise too, we believe that we are now at the starting point of a major development.”