It’s an interesting time for the industrial gas markets of Western Europe. The financial climate has been difficult; economic anxieties have been voiced where some countries are concerned in the eurozone.
Observations suggest a recovery is in progress, though to what extent is largely subjective by country.
As a wider concern in the Iberian peninsula for example, a troubled construction industry and difficult financial climate has seen the region struggle against this backdrop. Meanwhile, in Germany it is thought that consumer confidence is rising and further still, that the recovery in the country is slightly stronger than that of its eurozone neighbours.
Away from any currency crisis or eurozone concerns, discussions with Spiritus Consulting suggest that there’s a diverse picture emerging for the gases business of Western Europe.
Spiritus reflects on the aforementioned upturn in Germany and added, ‘In general, as far as 2010 is concerned, I think what has been interesting is a fairly strong economic recovery in Germany and Scandinavia’.
‘…how that translated for the industrial gas sector is a little unclear, but it’s done well,’ the consultancy disclosed.
In 2009 Western Europe was a gases market in decline, with industrial gas revenues of $17.6bn demonstrating a 10.4% contraction, Spiritus figures point out. Hardest hit in 2009 was the UK gases business, suffering a 17.7% contraction ($1.8bn revenues), compared to in Germany or France for example, with 9% and 8.2% contractions respectively.
In 2010, it’s thought that the gradual economic and financial recovery will have re-dressed the balance somewhat, bringing more stability to the region’s gases business. As industrial production continues to pick-up again, it’s believed that this trend will translate or correlate with an increase in industrial gas consumption too.
For our analysis this month we also gauge the views of Western Europe-based Messer Group, in an exclusive interview with Egon Glitz, Senior Vice-President Western Europe.
From our interview it seems that the pace of recovery in the region’s gases business mirrors that of the wider economic revival in the area, as largely expected. Further still, nuances in the gas supply trends across the Western Europe countries are highlighted and appear to show that packaged gases and bulk gases are still the two predominant methods of supply.
“In 2010 the industrial gases market in Western Europe clearly recovered from the deep recession due to the financial crisis. Germany and Switzerland in particular showed very strong improvements in industrial production compared to the prior year,” Glitz told gasworld.
“The expansion in Southern European countries like Spain and Italy started later – and on a much lower level.”
“Based on this positive economical background, Messer achieved [in Western Europe] a strong growth in sales and especially in profitability, due to higher loading factors of the installed production capacities. The ambitious investment programme in new production plants for air gases and liquid CO2 (LCO2) plants continued according to plan in 2010.”
Glitz explains that performance has generally been solid across the region for the Messer Group and takes us on a country-by-country tour.
“After the successful re-entry into the German market in 2007, Messer almost tripled sales in 2010 compared to the prior year. The full year effect of the start-up of the new ASU in Siegen at the site of DEW in late 2009 and the finalisation of the new ASU Salzgitter at the site of Salzgitter Flachstahl in summer 2010 contributed mainly to this extraordinary development.”
“Industrial gases in cylinders showed clear signs of improvement and specialty gases benefited from strong sales of gases with high purities and helium.$quot;
Data from Spiritus shows that Germany is still the largest single gases market in the West Europe region, ahead of France, Italy and the UK.
“In Switzerland the bulk air gas business was especially strong and the company benefits from independency with its own ASU in Visp [southern Switzerland]. The capacities of the newly installed ASU in Visp were well loaded in 2010. The profit was well ahead of the prior year in 2010, with the main drivers being lower energy costs for the ASU in Visp and cost savings in the areas of selling and administration.”
“The CO2 equipment business of ASCO showed a good recovery in 2010 after a difficult year in 2009. Dry ice equipment orders rose substantially and in 2010 ASCO successfully entered the US market for dry ice blasting equipment. However, the strong Swiss Franc had a negative impact in general.”
“Later than in Germany or Switzerland, the Italian economy recovered from the recession in the course of the year 2010. Industrial gases in cylinders for welding and laser applications showed good performance, in particular.”
The Italian gases business would have welcomed a renaisaance in 2010, having posted a 9.3% contraction in 2009 and fallen to a value of just under $2.4bn in that year, the 2009 figures from Spiritus illustrate.
Glitz adds, “In March 2010, the homecare business was sold to a local medical homecare company and Messer Italia is now focused on industrial gases as well as on the medical business for institutions and homecare providers.”
“Spain has not yet recovered fully, like other European countries, from the deep recession in 2008/2009. However, in the second half of 2010 the sale of pipeline gases showed strong growth rates. The medical gases sales to clinics and homecare providers developed well. The profitability was substantially ahead of the prior year, in line with strong sales and as a consequence of lower energy costs.”
At a value of just over $1.6bn in 2009 (Spiritus), the Spanish industrial gases business dominates the Iberian gases business and would expect to have recovered from its 11.6% contraction of that year.
“In France the start up of the new ASU in St. Herblain – a JV between Messer and Linde (LIMES) – was a highlight. The gradual loading of the new LIMES ASU increased the bulk air gas sales. Bulk CO2 sales were affected negatively by supply shortages in 2010.”
“The cylinder business developed well, the main drivers of this positive development were welding gases. Profitability was well in line with expectations.”
“In Benelux, Messer started up the new CO2 plant bECO2 in Antwerp. With a production capacity of about 20 MTPH the new plant makes Messer independent from competitors´ supplies in Benelux. Messer has strengthened its market position accordingly.”
“In the area of bulk air gases, liquid nitrogen showed an especially strong performance.”
“In Denmark Messer developed in 2010 according to plan and sees opportunities to conclude new deals in the future.”
For the purposes of this analysis we have gained the insights firstly of Spiritus Consulting and additionally of the Messer Group, with the consensus of both that the outlook appears fairly positive.
Overall, it seems that the recovery and revival in Western Europe is still contracted by country. This is something that Air Liquide recently reflected upon itself through its 2010 Consolidated Results report, released in February 2011. The report cites both a ‘recovery still contrasted by country’ and ‘continued growth in homecare despite price pressures’.
Further still, the report notes that ‘cylinder activity [is] still fragile in Western Europe’.
Glitz concludes, “For the year 2011 we are cautiously optimistic and expect a further recovery from the recession across Europe. However, the growth rates should be lower than in 2010.”