In this month’s regional market series, gasworld Business Intelligence focuses on Eastern Europe. The region has experienced better growth than its Western neighbour, chiefly due to the fact many more emerging markets are found in the East.
Even in the face of sustained geopolitical challenges – Air Liquide was forced to cease operations in Ukraine in March 2017 for example – the region remains home to a number of prominent emerging economies, and the gases industry continues to invest in markets from Romania eastwards to Russia.
The commercial industrial gases market in Russia was estimated to have generated revenues of $585m in 2016. This was up from $295m in 2006, indicating an average annual growth rate of 7% per annum (p.a.) for the decade.
Over the past decade the rate of GDP has experienced an average annual growth rate of 1.9% p.a., or 1.6% p.a. when adjusted for inflation. The rate of GDP was hit hard by the financial crisis in 2009, showing a decline of 7.8%, but did recover in the following years. The rate of economic growth in the country has turned negative since 2015, largely due to the fall in oil prices and financial sanctions placed on the country due to the ongoing conflict in the Crimea and Ukraine.
The majority of industrial gas revenues, roughly 64% of the market, was comprised of local and independent producers and distributors. There were six Tier One companies with operations in Russia, with Air Liquide being the largest and commanding a 13% market share. The other two Tier One players with double-digit revenues were Linde and Praxair, who commanded revenues of $73m and $30m, respectively. Air Products and Messer controlled marginal market shares, whilst Russian company Cryogenmash accounted for revenues of roughly $25m. There were also minimal revenues, approximately $1m, generated by Airgas in Russia. These revenues were generated through the sale of cylinders in Russia from plants in Alaska.
In 2016, the sale of packaged gas was the largest revenue generator for industrial gas in Russia, accounting for approximately three quarters of merchant market sales. Bulk liquid sales in 2016 stood at roughly $110m, with a further $130m being attributed to the sale of gas through onsite and pipeline methods. There was a vast captive market in the country, which we have estimated could be worth $1.5bn in revenue, if converted to onsite projects.
The captive segment will grow in the short-term, as a several new projects are set to be commissioned in the coming year. This includes a new 75,000 nm³/h SMR that will be installed at the JSC Orsknefteorgsintez refinery in Orsk.
The gases market in the Ukraine continues to be affected by the ongoing conflict in the country, with revenues amounting to just over $40m in 2016. This is down by approximately 20% over 2015, with the troubles of doing business in the country being exemplified by Air Liquide’s withdrawal of its operations in the Donbass region in March 2017.
ACP has, however, been investing in a carbon dioxide (CO2) recovery unit that will be installed at OPP’s ammonia production plant in Odessa, Ukraine. Both companies have reached agreement regarding the recovery of the waste product that occurs during the production of products at OPP’s facilities. The unit will recover waste CO2 from OPP’s ammonia plant which will, in the long-term, result in an annual capacity of 100,000 tonnes of CO2. The total investment is around €15m to €20m, with the plant originally expected to be ready for start-up within two to four years of its announcement (2017-2019).
The commercial industrial gases market in Poland was estimated to have generated revenues of $468m in 2016. This was up from $336m in 2006, indicating an average annual growth rate of 3.4% for the decade.
The industrial gas sector in Poland was dominated by three companies that, between them, controlled over 70% of the market. The largest of these companies was Air Liquide, with a 26% market share. This was followed by Linde, which generated revenue of just under $120m. Other Tier One companies with a sizeable presence included Air Products (21%) and Messer (9%). In 2016, Messer commissioned a new sizeable merchant ASU with a capacity of around 400 tonnes per day (tpd) in Lodz. The plant produces high purity product that is purchased by a range of medical, pharmaceutical and research customers alike.
Beyond this there were a handful of smaller independent gas suppliers focusing on the filling and distributing of packaged gas to a variety of end-users. The largest revenue generating supply mode of industrial gas in Poland was packaged gas methods, which accounted for $205m in gas sales. The second-most important supply mode was the sale of bulk liquid, which accounted for 23% of commercial revenue. There was also a significant onsite business in place in Poland, with most gas production plants less than 20 years old and generally well maintained.
The industrial gas markets of Latvia, Lithuania and Estonia collectively generated revenues of around $85m in 2016. Of these countries, the largest gases business is found in Latvia, where AGA is the largest company with a market share of around 85%. Messer, through a joint venture with the BLRT Group, is the second-largest company active in the region. Elme Messer has recently commissioned a new fully automated cylinder filling plant in Riga, Lativa.
In 2017, SIAD constructed a new ASU for Gaschema, the industrial gases subsidiary of Achema. The company also operates a liquid carbon dioxide facility at its main location in Janova, Lithuania and supplies gases to customers in the Baltics states and some countries in Scandinavia.
The commercial industrial gas market in Belarus generated revenues of around $20m in 2016.
The industrial gas business in Belarus is largely dominated by two companies that control roughly 81% of the market between them. Linde is the current market leader in the country with a 47% market share. The other major player in the region is Krion, which contributes revenues of just under $8m to the industry. The remaining industrial gas business in Belarus is made up of local producers and distributors.
Over half of gas revenues in the country, roughly 60%, are generated through packaged gas delivery methods. A further 34% of actual market revenues are gained through the sale of gas through bulk liquid. There is currently no onsite production in the country. gasworld Business Intelligence estimates that sales of industrial gas through captive methods would contribute $61m to the market, however this is an estimate and therefore not included in our analysis.
The gas market in the Balkans region amounted to around $360m in 2016. The largest market in this sub region is Serbia, where revenues reached almost $100m.
Messer is the largest company active in the region, and has been investing heavily in new capacity. The company recently constructed a new ASU located in Skofja Loka, Slovenia, which wiill mainly supply glass-fibre company Knauf over-the-fence with oxygen, but will also supply the local merchant market.