It’s the gas that feeds the world’s most profitable industries; huge quantities of oxygen are consumed in a multitude of industrial processes, as well as in the healthcare sector.
It’s for this reason that industrial gas companies have been bracing themselves over 2009, hoping that the tough time the oxygen-guzzling sectors have had as a result of the financial crisis will not impact on oxygen revenues too severely.
Oxygen is imperative to a plethora of different processes in the manufacturing, steel, chemicals, petrochemicals and refining sectors, to name just a few.
Globally, the oxygen breakdown for merchant and packaged gas amounts to around 60% manufacturing, which includes around 25% metals and glass, and then fabrication, electronics, food and beverage, and 40% healthcare.
For tonnage oxygen the breakdown is around 85-90% in manufacturing, and 10-15% in healthcare.
Demand for oxygen in merchant and packaged gases at a global level declined by more than 10% between 2008 and 2009, due to the financial crisis.
One only has to look to the manufacturing sector to see how things took a downward spiral and consequently affected the oxygen market – less cars were brought, which meant less steel was needed, which meant less oxygen for cutting and welding processes was required.
Whilst other sectors, like chemicals, petrochemicals and refining, may have stayed relatively stable and had little effect on oxygen supply and demand levels, other damaging factors have to be taken into account. For example, nitrogen supply and demand trends can directly affect those of oxygen, as they are inextricably linked in the air separation process.
This year however, things are looking brighter already; a general upturn across the spectrum is taking place, meaning things will gradually improve.
Joseph Horn, Global Head of Bulk Product Management at Linde, told gasworld, “Recent volume trends have been positive as economies around the globe have started to improve from earlier 2009 lows.”
“The merchant and packaged gas oxygen supply situation has improved from a very tight state in most markets globally in mid 2008, to where product is now available in sufficient quantities to drive growth as the global economy rebounds. Demand is also expected to rebound significantly in most geographies as economic conditions improve globally.”
Industry merchant oxygen supply has remained relatively stable, and growth can now be seen in some geographies due to new plant capacity builds that started prior to Q4 2008.
Pricing levels for merchant and packaged gas have remained stable, the only Tier 1 player to have made an announcement concerning oxygen price hikes recently is Praxair, which notified its bulk industrial and bulk medical gas customers in the US and Canada of a 10% increase in the price of the gas.
Opportunities for growth
According to Nigel Jewkes, Head of Market Development for Tonnage at Linde, the rate of growth of oxygen consumption in a country is closely linked to the growth of industrial production (IP). Therefore, countries with the highest levels of IP growth will also have the greatest opportunity for gas sales.
Jewkes told gasworld, “Despite the global economic situation, both China and India remain the strongest growth prospects, based on the development of their infrastructure and export of products to the developed economies.”
Horn confirmed this view adding, “India and China have seen flat or increasing volume growth year to date 2009 versus 2008 for merchant and packaged gas oxygen.”
Improved healthcare services and growth in the manufacturing sector in developing economies like Asia, South America and Eastern Europe are expected to provide attractive long-term growth opportunities for oxygen.
Horn explained, “Growth opportunities exist with respect to oxy-fuel combustion applications in manufacturing. Oxygen can reduce fuel usage while also providing reduced emissions of some atmospheric pollutants.”
The vast range of applications for oxygen has meant that the impact of the financial crisis has been clearly seen in the supply and demand trends of the gas, however, equally, the importance of oxygen in processes integral to everyday life means that as the economy recovers, the potential for growth is substantial.
Oxygen is supplied in a variety of ways, depending on the customer’s needs – how much oxygen they need and how often.
Customers using vast quantities of oxygen in addition to the other air gases on a regular basis are likely to opt for on-site supply in the form of an air separation unit on their own land.
Those needing vast amounts of oxygen only would opt for pipeline supply; the gas company pumps the gas through a pipeline system to the customer from its central air separation unit.
When a gas is liquefied, a far greater quantity can be stored, therefore customers requiring oxygen to be brought to them in large quantities will look to bulk supply – liquefied cryogenic gas. This is brought to the customer by cryogenic tanker, or in micro-bulk, meaning the gas is supplied in smaller dewars, which can be refilled when necessary.
Smaller users will opt for packaged solutions, in the form of compressed oxygen in cylinders. This is the largest market in terms of supply option for industrial gas companies.