What a year. How many times has that sentence been uttered this year? Indeed, we found ourselves saying it as early as the first quarter of the year, and here we are closing it with the very same. These are exceptional times and 2020 is for all, very much the year we’d like to forget and move on from.
We knew 2020 would be a significant year for our industry, for you, for us all. We knew that Helium Shortage 3.0 would continue to play out; we knew hydrogen and other alternative fuels would make great progress towards their necessary tipping points; and we expected that so many other key dynamics in the industry would continue to shape the year ahead. None of us could have foreseen, however, quite what a significant year this would be for all the wrong reasons.
By the time we were forced to write about it at gasworld and, therefore, the industry was well and truly impacted, the situation with Covid-19 had moved so swiftly that it required no introduction. We saw borders back up and countries shut down. The term ‘lockdown’ became synonymous with 2020 all around the world. The ‘new normal’ was established almost overnight; a new business playbook written.
We’ve all endured truly challenging, distressing and unprecedented times – times that we’d rather forget, and yet amidst it all we have seen strong reminders once more of the inherently robust nature of the industrial gases business and the sheer agility and adaptability of the industry, and those within it.
This has been a year of crisis management during the maelstrom of the virus; and yet contemplation of what we hold dear in our personal lives, and reappraisal of what we believe in our societal and environmental footprints and our business strategies. It’s been a period of forced adjustment to the new normal.
Roadmaps for the future
I think and I hope that the year ahead will be more about choice and strategising how we shape the new-old normal; how we want that recovery to look both collectively and as individuals and companies, and what role we believe we are best equipped to play. Think empowerment over adaptation.
In that regard, if 2020 was the year of crisis and adaptation, then I believe 2021 will be the year of change. It will be a year of choice; of choosing new paths forward.
That’s why I believe we may see more M&A emerging throughout the year (and the decade). With each new cycle or chapter for the industry, there is fairly notable M&A activity as new orders and structures are established. On top of which, I think we will see strategic decisions made by many companies in terms of how and where they play their part in the clean energies transition; will they set their stall out in carbon capture and utilisation, will they redouble their efforts in the LNG business, or will they throw their weight behind hydrogen?
That could lead to significant asset swaps and acquisition activity as companies and CEOs seek to realign with and realise the right opportunities for them.
“…if 2020 was the year of crisis and adaptation, then I believe 2021 will be the year of change. It will be a year of choice; of choosing new paths forward”
Just look at the business activity of Chart Industries this year as a good example. Having started the year by signing up to membership of the Hydrogen Council, the company has continued to set its stall by playing a key role in the clean energies transition and has aligned its assets accordingly. It also became a member of the new European Clean Hydrogen Alliance via its Chart Ferox business, joined the Hydrogen Europe association, and in a 48 hour period in October it announced a €30m investment in French hydrogen production company McPhy and the acquisition of the Theodore, Alabama cryogenic trailer and hydrogen trailer (transport) assets of Worthington Industries.
The latter acquisition includes ownership of the Theodore manufacturing site, all trailer-related intellectual property, manufacturing capabilities, equipment and repair backlog. It produces strong synergies by combining Chart’s deep knowledge of cryogenics and liquid hydrogen storage and handling with the Theodore operation’s expertise and experience in the packaging and assembly of liquid hydrogen trailers.
Hydrogen was definitely the overt story here, and Chart said that expected hydrogen-related revenue from this facility in 2021 is $15-20m. Upside potential looks like around $30m in 2021. Both point to the immediate revenue growth opportunities in hydrogen. But the devil is in the detail of this particular announcement, and the closer inspection of that detail demonstrates that this deal is as much about another of the clean fuels of today and tomorrow – LNG – as it is hydrogen. This is about Chart further reinforcing its already strong capabilities in LNG and cryogenic equipment – another of the key narratives emerging from the company this year.
Just as Chart has been busy mapping out its journey in hydrogen, the company has simultaneously been further its footprint in the LNG sector. In May, it became the newest member of the Australia-based LNG Marine Fuel Institute (LNG MFI); in June it acknowledged that the new ruling allowing the use of cryogenic railcars to ship bulk quantities of LNG from production plants to destinations across the US from late July was a key development in the US, not least for Chart; and then the asset acquisition in Alabama in October joined up more of its dots in LNG.
All of which is a perfect example of an industrial gas and equipment company aligning to the growth opportunities. This realignment was also an objective of President and CEO Jill Evanko since she took on the role in 2018, and I’d have to say I think a brilliantly clear, concise and effective path forward has been paved for Chart in 2020 alone. The company has better balanced its business segments with the divestment of non-core assets and ramped-up investments in its core and emerging areas of focus.
Another example might be the path that Air Products continues to carve out in gasification technologies, which unite the core of the air gases business with newer, cleaner energy efforts. Gasification is a long-established technology with a fascinating future, triggering mega-scale industrial gas projects, and an area that Air Products has rapidly built an impressive portfolio in over the last couple of years. That path continued this year with news in May of a huge $2bn agreement to build a coal-to-methanol production facility in Indonesia, with air separation, gasification and syngas clean-up at the heart of the project.
Others have also been establishing their position in a similar vein, exiting some markets and fortifying in others, and I’d expect this to continue in the year(s) ahead as not one, but several new playing fields crystallise and emerge.
How we play the game in those fields will also be part of the roadmap that emerges for our industry. Here we’re talking about the digitisation of operations, new business models and approaches to the way we do business.
A new cycle in the industry’s history
And so, in looking ahead to 2021 and the years beyond, it feels as though we are entering the latest new cycle for the gases industry.
I am only a scholar of this industry for circa 15 years, so I am more than happy to stand corrected, but a relatively cursory look back through industrial gas history suggests several key periods or cycles in this industry since Carl von Linde et al first began to develop refrigeration cycles, liquefy air and later separate it well over a century ago. From what we observe and the confluence of megatrends occurring across the industry today, I believe this could be the start of the latest cycle for the global industrial gases business.
Clean fuels present one of the biggest opportunities for our industry in many ways, as countries all around the world move towards deep decarbonisation of their ecosystems. This has been coming for some time – we have of course been talking of such a megatrend at gasworld for many, many years – but it feels as though the clarity and action that may have been missing has now been realised in the past year.
Read more: Exuding energy for future pathways
Indeed, this was a trend line highlighted by Sanjiv Lamba at gasworld’s Virtual Event 2020, as the year began to draw to a close. He enthused, “There is growing momentum across the world on decarbonisation, that momentum is coming from governments and corporations. Governments are standing up and saying that by 2050 or 2060, we wish to reduce emissions, we wish to be neutral – to act today and provide some relief to the climate and the environment and manage the climate change that is all around us.”
“The industrial gases industry has a unique opportunity to play a role,” he added. “I say unique because it has a role by which it can help its customers, by providing technologies and gas applications that ensure that they become more effective at managing their emissions, make them more efficient and more positively environmentally impactful, and at the same time as an industry we need to recognise that we have a role to play here as well.”
“Most companies recognise that we are part of this emissions circle, as it were. As an industry we have to take steps to ensure we manage our own emissions, while supporting our customers in managing theirs.”
Later speaking of green hydrogen in particular and reflecting this feeling of new chapters being written, he added, “As an industry we live and breathe and work with hydrogen every day, and there is a core competence that our industry has to move this agenda forward. It’s a very exciting opportunity for us and this third trend clearly provides our industry with the momentum it needs to look at a whole new growth model within our space.”
We are also seeing a new era get underway in how business is built and transacted. Not only has the wave of digitisation been through forced acceleration this year, but after the initial gold rush of business travel that’s inevitable when travel is a viable opportunity again, I genuinely think we’ll see a change in the industry’s approach to travel and in-person engagements. The industry is based on that core pillar of human, personable interactions but as I reflected on stage in Malaysia two years ago, the digital technologies emerging merely resemble a reinforcement of those core pillars, and I think we will see that realised. We already are; we’ve been forced to accept virtual meetings, seminars, webinars and networking this year, and these have become practical alternatives.
“…in looking ahead to 2021 and the years beyond, it feels as though we are entering the latest new cycle for the gases industry”
At the same time, we’ve been served emphasis on how good face-to-face relationships really are. I’d be surprised if we didn’t see a more savvy, strategic approach to business and travel come to the fore in the year(s) ahead, particularly after companies have seen what is achievable virtually – and how much more budget they’ve had available this year.
There will be more pressing issues in the year ahead, of course. We expect that we will see a new helium market begin to emerge in the second half of 2021, for example, while it could be replaced in headlines of shortages by dry ice as a key component in the storage and distribution of Covid-19 vaccines globally, if all the current talk is to be believed.
All of which makes 2020 not just a challenging year, but a watershed year in so many respects – and 2021 an even more exciting year as that journey continues and we carve out the start of something new.