Early July 2010 and the International Monetary Fund (IMF) raised its forecast for global growth this calendar year, up from an expected 4.2% to 4.6%. At the forefront of this is China, suggested to grow at a rate of 10.5% in 2010.
According to the IMF, a robust Asia market is driving global economic growth, with the North Pacific Rim economies of South Korea and Taiwan experiencing increased growth forecasts. At the heart of it all though, is China. After the anticipated 10.5% growth this year, the IMF predicts a further 9.6% expansion in 2011.
And China is very much at the forefront of the industrial gases business right now too, with the backdrop of economic evolution intrinsically linked to a spike in the Chinese gases business.
This was a point alluded to in last month’s gasworld interview of the month with Jinhong Gas, now one of the largest local gas companies in the East China region. Jinhong Gas has enjoyed a rapid rise to prominence since its formation in 1999 and sees the ongoing development in China as key to its next chapter of growth.
Managing Director JIN Xianghua explained, “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. 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.”
Another company exuding confidence in the growth prospects of Chinese gas & equipment companies, and the country’s gases business as a whole, is Hangzhou Hangyang.
The company was launched on the Shenzhen Stock Exchange on 10th June 2010, becoming the second major Chinese gas company to be listed in the stock market after Yingde Gases was floated last year (2009). Hangyang is now one of the top five ASU manufacturers in the world and has the largest market share in China.
Company revenue in 2009 was RMB2.686bn; equating to annual growth of 2.3%. Meanwhile net profit was RMB 251m; an increase of 16.9% from 2008, we were told in an interview last summer. Hangyang is now aiming to build on this even further with its strategic launch onto the stock exchange – which Managing Director Mr. JIANG Ming believes will ‘substantially’ enhance the company’s foothold in the market.
Speaking at the launch on the stock exchange, JIANG Ming eulogised, “It has been our target for years to enter the capital market. Through the launching of shares this time, our strength will be enhanced substantially. We are strongly confident about the future, and we will make use of the launching in the domestic market to expedite the development of Hangyang and to realise the continuous fast growth in the scale of enterprise and operational profit – thus creating more value for the investors and the community and forging the strong foothold of Hangyang as a famous brand in the world.”
This appears to be a preparation for growth shared by another local independent, the aforementioned Yingde Gases Group Company Limited. Citing itself as ‘arguably the largest domestic independent industrial gas supplier specialising in onsite gas supply in China’ (in terms of total revenue as at year-end 2008), Yingde Gases was successfully listed on the Hong Kong Stock Market in late 2009.
It represented the start of a whole wave of Chinese gas companies reportedly keen to launch on the stock market and reap the rewards. That’s an especially interesting trend when considering that China gases scene is dominated by the independents; it’s thought that 55-65% of the local industrial gas market is made up of independent gas producers & distributors.
Growth drivers & end-users
If the China gases market is so robust in it’s growth rates, what’s the driving force behind this rapid expansion?
The general consensus appears to be that gases growth will be derived from the steel industry, solar cells, coal chemistry and perhaps predictably as we head for a greener and ‘cleaner’ future, hydrogen.
The usual indicators would suggest this too – several contracts with the major players have been signed in the past 12 months and in 2010 in particular. Further still, gasworld interviews during the past year have affirmed this belief, as Hangyang’s General Manager Mr. Shao Rong MAO, Praxair China’s David Chow, and Jinhong Gas’ JIN Xianghua all confirmed the end-user potential.
Alluding to the demand driving the market, as of July 2009, Hangyang’s MAO explained, “Demand in the steel industry is great and we foresee that there will be some restructuring and modifications in technology, which will bring more opportunities.”
“Coal chemistry is another industry that will require large-scale ASU activity, while the gas consumption is enormous and there are many such projects in China.”
A prime example of ASU activity for coal chemistry was demonstrated in April 2010, when Air Liquide signed two contracts in China to supply four ASUs for new clients in the coal-to-chemical industry.
In China, the Coal-to-Chemicals (CTC) industry is developing rapidly, and large quantities of oxygen are required to meet demand related to the Coal-to-Chemicals transformation process. Air Liquide is quick to capture the emerging growth and has signed the two new contracts in China – supplying four ASUs to be designed, manufactured and built by Air Liquide Hangzhou, the company’s Engineering & Construction centre in China.
Two ASUs, each with a production capacity of 1,400 tonnes of oxygen per day, will be provided for the Yulin Energy and Chemical Corporation of Shaanxi Yanchang Petroleum Group. Two further ASUs, each with a production capacity of 2,100 tonnes of oxygen per day, will be delivered to the Shandong Hualu Hengsheng Group.
In a press release issued at the time of the announcement, François Darchis, Senior Vice-President of Air Liquide Group, in charge of R&D, Advanced Technologies and Engineering & Construction, explained, “With the signature of these two contracts, Air Liquide strengthens its presence in China, especially in the Coal Triangle Region. Numerous successes in coal conversion, in addition to our recent contracts in the iron and steel industry in China, demonstrate the competitive edge of our teams.”
Air Liquide has also been busy securing contracts to the budding steel industry in China, signing long-term contracts with at least three steel producers and investing a total of around €115m to meet the needs of these new customers.
Deals were struck with the Bohai Steel group in Tangshan, Hebei Province (near Tianjin), the Jianbang Group in Linfen City, and Xilin Steel Group in Yichun, northeastern China’s Heilongjiang Province.
China is the largest steelmaker worldwide with a production that rose 14% to a record 568 million tonnes in 2009 – nearly half the world’s production. And as China’s focus moves towards better utilisation of its steel-making capacities, oxygen is the key to enhancing productivity.
To that end, Air Liquide will provide oxygen and nitrogen to Bohai Steel Group from a large 2,200 tpd ASU, an 800 tpd oxygen unit for the Jianbang Group, and a 1,200 tpd ASU supplying oxygen, nitrogen and argon to the Xilin Steel Group. The latter ASU is due to be commissioned in Q1 2012.
Solar cells & clean energy
Perhaps predictably, solar cells and clean energy are very much at the forefront of developments in the gases business of the People’s Republic.
Estimates suggest the China gases business was already marching on towards a value of around $3.8bn at the close of 2009, and yet with the increasing rise of solar cells and cleaner energy technologies, this could push that figure even higher in the coming years.
Among other such deals agreed in the country, The Linde Group and its subsidiary, Linde LienHwa (LLH), have jointly announced several long-term gas supply contracts with leading Chinese solar manufacturers.
The multi-million dollar contracts will see Linde supply gases to the full solar manufacturing value chain in China, from polysilicon to major solar module manufacturers. These include GS Solar, Parity Solar, CNPV Solar Power SA, General Solar Power and Argus Power.
Linde’s Greater China Regional Business Unit will construct and manage two steam methane reformers (SMRs) in Xuzhou, Jiangsu province, for the supply of high purity hydrogen (H2) products for the rapid capacity expansion of polysilicon manufacturing. It’s electronics-focused subsidiary LLH’s new long-term gas supply contracts, on-stream this year in China, will provide delivery of bulk and specialty gases essential for solar cells manufacture.
As for hydrogen, Air Products has recetntly signed a long-term agreement to build a hydrogen production facility for PetroChina Company Limited, one of the largest oil and gas companies in the world.
The joint venture will be based in Sichuan, China and constitutes the first state-owned refinery which will outsource its hydrogen requirements. The facility, a steam methane reformer (SMR), will produce hydrogen and syngas to support PetroChina’s Sichuan refinery and petrochemical facilities. The plant will offer a daily capacity of over 90m ft³ of hydrogen, with production is scheduled to commence in early 2012.
Phil Sproger, Vice President of Business Development for Asia at Air Products, commented, “We are honoured to be part of this first-ever contract to provide outsourced hydrogen to PetroChina. This project will help make cleaner transportation fuel available to meet China’s growing demand.”