AFTER THE doom & gloom of the last nine months, one could be forgiven for thinking that the recession-hit Western Europe market is in freefall.
In economic terms this may well be the case, but from a gases perspective there’s no reason to hit the panic button just yet.
Of course the recession has hit, industries have suffered immensely, and the Western Europe gases business has inevitably taken the strain. Those of the opinion that Western Europe, like North America, would be one of the biggest casualties aren’t entirely wrong.
It’s also a conviction well versed by both Spiritus Consulting’s John Raquet and Stefan Messer of the Messer Group (see page 30) in their recent interviews with gasworld.
Much like the role of gases in industry, there’s just no escaping it.
Whilst we wouldn’t want to ‘finesse' the situation, it is worthwhile giving it some context.
Steady and solid
Second only to North America, Western Europe is a sizeable industrial gases business with the traditionally thriving German market at its core.
Growth has been both healthy and consistent, with approximately double-digit growth year-on-year since 2005. In addition, 2008 was actually a strong year for our industry and naturally this transposed into another buoyant year for the West Europe region.
Figures show that the region has grown from a value of $14bn in 2005 to revenues of just over $19.4bn in 2008, based largely on the manufacturing, chemicals and metallurgy industries.
Furthermore, early projections from Spiritus Consulting suggest 2009 will maintain the 2008 level of revenues, with further growth not expected until 2010, when a market value of $19.85bn is projected.
The economy came off the rails in the final quarter of 2008 though, so where do we stand now?
Essentially, what it all means is that while the Western Europe market is taking the strain of a deepening downturn, the region is still a huge gases business and will continue to be so.
In fact, based on Spiritus assumptions, the market will merely stand still in 2009 rather than depreciating – and as 2010 unfolds we can expect growth to have recovered.
Manufacturing dominates the revenue stream for end-use segments in Western Europe and so, with the spectacular collapse of global manufacturing at the hands of economic chaos, the region was always like to suffer.
The sector accounted for around $4.9bn of revenues in 2008, or roughly 26% of the region’s gases market, and this is expected to fall ever so slightly ($4.8bn) in 2009 as the economic correction is reflected.
If this is the case, then where is growth going to come from? Which other sectors are strong?, we might ask.
Again, we could be forgiven for thinking that the Western Europe market is about to plunge into depression, but this is not the case just yet.
Until the green shoots of economic recovery begin to emerge and a rejuvenated manufacturing industry is in bloom once more, a number of other sectors will show resilience.
Non-cyclical industries such as healthcare and food & beverages will afford some buoyancy, while renowned industrial gas guzzling sectors such as chemicals and metallurgy will also keep the West Europe gases business afloat this year.
As far as end-use segments are concerned, chemicals comprise a 23% share of the market, while metallurgy accounts for 16%.
After the downturn in demand for steel and an overall negative effect on the metals markets of late, metallurgy could be expected to dwindle slightly in terms of gas revenues – yet Spiritus estimates this sector to account for $3.1bn in 2008 and the same again this year.
Such consistency will be built on in 2010, with an incremental rise to revenues of $3.3bn.
Healthcare made up 14% of the West Europe gases market in 2008 ($2.7bn) and food & beverages 9% ($1.7bn), both of which are expected to show further, typical consistency as the next 18 months unfurl.
Also expected to shore-up the region’s gases business are a selection of new projects in the news in recent months.
Air Products announced it would play a key role in the world’s first full demonstration of oxyfuel carbon capture and sequestration, with the signing of an agreement with Vattenfall AB, one of Europe’s leading energy companies.
The company will install a proprietary carbon dioxide (CO2) capture, purification and compression system at Vattenfall’s research and development facility in Schwarze Pumpe, Germany.
Also in Germany, we understand from our interview this month with Stefan Messer that the family-owned independent gases group has a range of projects underway throughout both Germany and the Western Europe region overall.
Having consolidated its positions in European healthcare over the past few years meanwhile, Air Liquide is further strengthening its network through targeted acquisitions.
Already the leader in Belgium and Germany, Air Liquide announced this year that it will now gain national coverage in the Netherlands as a result of the acquisition of Comcare medical.
Specialising in the treatment of Obstructive Sleep Apnea, Comcare medical treats 7,300 patients and in 2008 generated revenues of roughly €3m.
Despite the tough financial conditions, Air Liquide has also announced that it will invest nearly €20m in the European market in industrial applications for carbon dioxide, essentially food processing and water treatment.
To support the continuing growth of the market, Air Liquide is investing in two CO2 recovery units – one in Bazancourt, France and one in Rozenburg, the Netherlands. The new units will see CO2 purified and liquefied for reuse, instead of being released into the atmosphere.
The Bazancourt unit, which will be commissioned by the close of 2009, will recover 120,000 tonnes of CO2 per year and will include rail links to the site, reducing road transport.
The Rozenburg unit, scheduled for commissioning in the first half of 2010, will recover 50,000 tonnes of CO2 per year, in particular to respond to demand created by strong growth in the greenhouse cultivation market in the Netherlands.
The announced investments come in addition to its CO2 liquefaction unit in Geleen in the Netherlands, where a third extension was commissioned in October 2008, representing an additional production of 80,000 tonnes per year.
The addition of the Bazancourt and Rozenburg units will take Air Liquide’s total European CO2 capacity to more than 250,000 tonnes between 2008 to 2010.
At the same time down in the Iberian Peninsula, Air Products will be delivering on its recently-signed turnkey gas supply contract, to provide a Gadir Solar facility with liquid bulk and specialty gases.
The contract includes the long term supply of nitrogen, hydrogen, argon, oxygen and specialty gases such as silane and nitrogen trifluoride to Gadir Solar, at its new silicon thin-film photovoltaic (PV) facility in Puerto Real, Cadiz, Spain.
The contract will also see Air Products install and operate the complete gas distribution systems from source containers to the point of use.
At this point it would be easy to simply brush aside any worries Western Europe may harbour for readers involved or interested in the region.
The truth is, Europe has been in widespread recession and the region’s industrial gases business has suffered, that’s inescapable.
The economic correction is not thought to cause the market to contract this year, but has perhaps brought about something of a reality check, particularly with the collapse of the global manufacturing sector six months ago.
Concerns are not without foundation, but on the balance of play, there are also several positives to draw comfort from.
A number of new projects remain unperturbed and a cautious approach from the gas companies is likely to ensure the worst of the downturn is sidestepped.
Furthermore, non-cyclical industries will sustain the markets where possible and consolidated revenues from a multitude of end-use sectors will continue during the next 18 months.
Finally, the latest projections of Spiritus Consulting suggest Western Europe will recover in 2010 and continue to pick-up growth through to 2013, when an industrial gas market valued at $22.7bn is anticipated.