The dynamics of the global business and economic climate are shifting. While the Western Europe and North American economies are still struggling to recover from the shockwaves of recession, China is prospering.
Recent reports (BBC News) suggest that China recorded up to 8.7% growth in its economy last year (2009), with growth in the final quarter of 2009 up 10.7% from the same period in 2008. It’s thought that the country is now set to overtake Japan as the world’s second-largest economy, after the US.
In contrast, Europe is believed to be floundering somewhat or at the very least, progressing slowly. The UK in particular is said to be facing a decade of ‘painful readjustment’ and will need to focus its efforts on increasing exports, some financial studies suggest.
So how does this decline compare for the industrial gas markets? What’s the state of play in Western Europe?
If initial projections are to be believed, the region’s industrial gas business has suffered a similar plight to that of its economy.
At first glance, a Western Europe gas market of $17.8bn was in evidence in 2009.
With much data and figures still to be collated and compiled, we have to rely on projections released between the close of 2009 and early January 2010. These numbers suggest the above valuation of $17.8bn for the region by the close of 2009 – down by around $1.9bn when compared to 2008 figures.
By the same numbers, we can chart the progress from 2003 to 2013. For the five year period of 2003-2008 we saw a CAGR of around 10.7% and the cold, hard figures back this up; the West Europe gas market of 2003 ($11.8bn approx.) rose to $19.7bn in 2008.
Using the very same projections from Spiritus Consulting, we can approximate the market over the next four year window – when an optimistic CAGR of 2.8% p.a. is predicted (2009-2013).
A contraction of $200m was initially expected for 2010. Though as the picture becomes clearer and the optimism resurfaces, it’s thought that this may not be the case after all; we may even see a little growth if the easing conditions and sequential quarterly improvements are anything to go by. Hence the above projections of potential 2.8% growth per annum.
If that’s the case then a return to 2008 levels of gas revenues may come quicker than forecast – Spiritus’ original projections anticipated that this might not occur before 2013 (when a value of $19.9bn was suggested by the forecast models).
During the same year (2013) we are likely to have seen a North Pacific Rim (NPR) market reach up to $19.3bn in industrial gas revenues, creeping closely up upon the shoulder of West Europe. The former is projected to achieve a CAGR of 9.2% p.a. within the 2008-2013 timeframe and will be reaching its maturity as the much-discussed market of potential, largely spearheaded by China.
Much of this industrial gas growth could perhaps be driven by the end-use sectors of manufacturing and electronics, both of which are buoyant in the NPR region. Manufacturing as a global end-user sector is projected to gradually recover, and account for some $21.7bn of global industrial gas revenues in 2013.
The Electronics sector meanwhile, is projected to keep growing at a steady CAGR of 7.6% (2008-2013). By 2013, industrial gas sales to the sector are set to be worth as much as $8bn.
Again, it’s too early to offer conjecture about exact numbers, but whatever the outcome, one thing is still clear: Western Europe will retain its status as the second-largest global industrial gas market both this year & over the next three years.
And if we do see a growth this year, rather than contraction, then it’s not inconceivable to see a return to 2008’s high levels of revenues in West Europe by as early as 2012.
There’s a definite sense of confidence in the region, from those companies already at the heart of the market and perhaps best-placed to offer insight on Europe.
In our interview last year, Messer Group Owner and CEO Stefan Messer emphasised the fact that the company would be focusing on growth in its two core markets – China and Europe.
Messer has already embarked upon an ambitious project of new plant installations across East & West Europe and up until this year, its investment will have amounted to around €400m over three years.
Mr Messer told gasworld, “We were quite dependent on our competitors before – Poland for example, and some other countries where we were only a wholesaler or distributor, so we decided to build 10 new plants in Europe. Up to 2010, we will have spent about €400m over three years to construct them; we have one in Spain, in France where we have a joint venture with Linde, two in Germany, one in Romania, Bosnia-Herzegovina, Poland, Switzerland, Turkey and then we have two pending projects in Lativia and in Ukraine.”
“We are concentrating on these key regions first,” he added.
During our 2009 interview, Mr Messer also revealed the company’s key financial figures for 2008, telling us that in 2008 the group invested €194m, and adding, “We will invest about the same this year and about the same next year; that includes the 10 plants in Europe and four plants in China and Vietnam.”
“It also includes some filling stations – in Spain we are building a new filling station, we’ve just opened stations in Germany and one in Italy, and we are also building one in Romania. Then of course we have to invest in cylinders, trucks, trailers, tanks and vaporisers, and this is all included in this figure.”
Another company investing in European growth is Westfalen AG, as our interview this month with Technical Director Gerhard Schlueter explains.
Westfalen, also an independent family-owned German company, boasted turnover of ‘approximately €1.5bn in 2008’ and is keen to build on its strong German roots with a broader network of plants and offices throughout West Europe. Schlueter told gasworld that the company invests up to €60m per year and up to €46m of this is devoted to its technical gases business.
Westfalen has a new ASU under construction in Le Creusot, France and is also confident of further new projects on its agenda. Our interviewee this month explained, “Of course there will be new projects. The Westfalen group invests about €60m per year, so we always have new projects on our agenda. Our focus is on strategic and organic growth in order to strengthen our position as European gas supplier.”
The confidence in West European gases growth doesn’t end there either. On our visit to Italy earlier this year, we learned that a number of gas and equipment firms are full of optimism.
The downturn is inescapable and equipment demand may have fallen far further than previous estimates of 20-30%, we understand, but the recovery is in progress and we may even be reflecting upon marginal growth in Western Europe by the close of the year.
Certainly if the respected sentiments of others are to be relied on, then there’s a lot of reason to be positive about the prospects for this region.