Medical customers and food delivery continued to drive business for distributors during the coronavirus (Covid-19) pandemic, according to the 2021 first quarter (Q1) findings from the latest Baird/gasworld Welding and Industrial Gas Survey.
The start of the year saw a rise in demand for medical oxygen in certain areas – Los Angeles; the Navajo Nation; El Paso, Texas – that saw a surge in hospitalizations and Covid-19 patients needing oxygen. Nearly half of respondents saw an increasing trend in medical oxygen in the first quarter of 2021, with 43% seeing a modest increase and 5% seeing a significantly higher increase.
A surge of Covid-19 patients requiring supplemental oxygen drove an increase in demand for oxygen in hospitals across the US. The pandemic stressed the infrastructure for delivering oxygen to hospitals and their patients. Hospitals’ infrastructure was also put under strain due to the volume of cold liquid oxygen freezing the equipment. Vaporizers frequently iced over due to the increased use, leading to delivery systems getting blocked. Brio Services reported to gasworld it has been frequently called out to hospital to de-ice vaporizers. When vaporizers got blocked, hospitals switched patients to cylinder-delivered oxygen, but that then put pressure on the hospitals’ cylinder oxygen supply, as well as the medical gas supplier.
Demand for oxygen also put pressure on access to the portable cylinders that contain oxygen. But oxygen supply chain pressures have dissipated as Covid hospitalizations have fallen through 2021 since peaking earlier in the year.
Other trends related to the pandemic have driven demands. Most (62%) respondents have seen a rise in dry ice demand with the majority who have seen an increase experiencing a ~10% increase (15% have seen a ~20% increase).
Dry ice has been vital in the storage and distribution of the Covid-19 vaccine from pharmaceutical firm Pfizer-BioNTech, but it is the rise of the trend for food home delivery – especially during lockdowns – which has been the biggest driver. The majority (75%) of respondents attributed the increase in dry ice demand to incremental food delivery demand. The remainder attributed the increase to both increased food delivery and Covid vaccine storage.
The US Food and Drug Administration’s ruling to relax temperature requirements of the Pfizer vaccine has somewhat dampened the increase in dry ice demand (www.gasworld /2020571.article), with 71% expecting a lower demand later this year due to the ruling in February.
Conditions generally continue to improve with hardgoods and gas revenues showing clear sequential uptick. Q1 hardgoods sales increased 4.2% improving from 0.8% in Q4 2020. Sales of industrial gases were up 4.3%, improved from +1.3% in Q4 2020). Respondents reported generally a better than expected quarter with improving business activity through the first few months of 2021.
Hardgoods pricing improved sequentially, up 3% year/year compared to +1.4% in Q4 2020, while gases pricing rose 2.1% year/year, up from +1.5 last quarter.
Growth is expected to pick up in Q2 2021 and build additional momentum through the year. Respondents expect hardgoods revenue to increase 5.1% in Q2 and up 7.4 for the full year 2021 (vs. +4.2% last quarter) with sales of gases to increase 6.8% in Q2 2021 and +8.4% for the full year 2021 (vs. +6.2% last quarter).
Most respondents (60%) said business had improved modestly or improved significantly in Q1 2021, with 28% experiencing significant improvement. And 44% of respondents reported results better than initially expected, with almost half (48%) saying Q1 business was in line with expectations.
An overwhelming majority (87%) expects to be able to fully pass through rising input costs. Many respondents called out challenges throughout the supply chain.
“Gas plant shutdowns have caused surcharges and extra trucking costs, particularly for CO2,” said on respondent.
“Supply issues are starting to impact sales,” said another.
Tools, software, and programs to improve unit delivery and trucking productivity to reduce unit costs included use of Anova’s bulk cryo liquids storage inventory control, Computer Unlimited’s TIMS software, Pulsa telemetry devices, Truckstops route planning and Big Road, according to respondents.
“Worker availability from Covid supply chain disruptions had accelerated the development and use of increased automation in remote functions of marketing/sales, admin and new operations work tools to get higher output per manhour of work,” said one respondent.
“Our focus has been more on route efficiency and consolidation,” said another.
The survey encompassed the viewpoints of 25 executives at industrial, scientific and welding gas/hardgoods distributors and manufacturers across North America.