Mining, manufacturing and metallurgy are all big markets in South America, and with good levels of growth reported across the region the demand for industrial gas is booming. We begin our tour of the continent with a country by country breakdown of the 2006 gas revenues, before we whisk you through what's happening with the biggest companies in the market. Finally join us as we round off with a few thoughts about what happens next.
Brazil is one of the largest markets in the region with a GDP in 2006 estimated at $718bn. The large economy is based on agriculture, mining, manufacturing and service sectors and the World Bank estimates this grew (in real terms) by 3.7 percent in 2006.
According to the International monetary fund (IMF) and the World Bank, Brazil's GDP by purchasing power parity Brazil has the ninth largest economy in the world and tenth largest at market exchange rates.
Gas revenues in 2006 reached $1.48 bn, a growth of 12 percent compared to 2005 figures (of $1.33bn). The markets here are dominated by sales to metallurgy and the manufacturing industry which together account for half of all usage.
The chemical industry receives around 18 percent of gases produced while other markets take small shares such as healthcare (11 percent), food (8 percent), and minor consumers such as electronics, paper and glass.
Argentina has rich natural resources, together with a highly literate population, an export-oriented agricultural sector and a large industrial base. This contributed to their strong GDP in 2006 of $329 bn and real growth of 8.5 percent during the last year. This country has seen many changes over the past century due to recurring economic crises, high inflation and mounting external debt though since 2002 the poorer sectors of society have seen an improvement.
Looking at industrial gas usage in the country, revenues in 2006 achieved a high of $0.3 bn, a growth of 19 percent against the 2005's sales of $0.26bn. A third of the market here is for manufacturing followed by metallurgy at around 20 percent, healthcare and chemicals at 13 and 11 percent respectively. A small measure of gas products went to food applications and smaller portion still to glass and electronics.
Venezuela has a GDP estimated to be around $202 bn, which has followed the regional trend for growth with an increase of 10 percent in the last year. The country is heavily reliant on its oil revenues which account for roughly 90 percent of export earnings and around 30 percent of its GDP.
The industrial gas market in Venezuela grew 20 percent in 2006 according to figures, reaching sales of $0.14bn by year-end. As in other countries in the region manufacturing was a key consumer here (36 percent), whilst the chemicals industry came a close second with 28 percent. Halve that again and you are close to healthcare sales, which accounted for 15 percent of usage and towards the bottom end of the market smaller shares were required by food (5 percent), metallurgy (4 percent) and glass (1 percent.)
The GDP growth rate in Colombia is slower than reported by its neighbours, just 6.8 percent in 2006 based on a GDP of $107bn. The industrial gas market still made a good showing against these results, with an increase in revenues of 20 percent from $0.16bn to $0.2bn in 2006. Profits from sales to manufacturing reached 38 percent of production with healthcare and metallurgy coming in behind at 20 percent and 15 percent respectively. Food applications used 13 percent of gas produced and the chemicals industry took a further 8 percent of total output.
Chile has high foreign trade and is a keen market-orientated economy with a GDP in 2006 estimated at $121bn, a real growth rate of 4.2 percent. It has many markets which apply industrial gas applications including mining and vinery which helped to push gas sales in 2006 up 14 percent to $0.27bn. The race to the top of the market is tight in this country and the leading consumers include metallurgy (25 percent), manufacturing (24 percent) and chemical producers with 23 percent. Healthcare accounts for around 10 percent of supplies needed, whilst food and paper also require minor volumes of product.
Peru has had problems self-sustaining growth and income distribution. Over half of the country is regarded as poor, and nearly 20 percent are very poor. However GDP seems comparatively high compared to others in the region, estimated at $73bn which provides a real growth rate of 8 percent in 2006. Just over half of Peru's GDP is accounted for by services, followed by 22 percent in the manufacturing industries. As you would expect therefore 55 percent of gas use is funneled into manufacturing, whilst metallurgy takes the runner-up spot with 20 percent of the country's gas requirements. Healthcare uses 10 percent of gases sold whilst the chemical and food industries use 5 percent each.
Ecuador's GDP was estimated last year at $22bn, a real growth of 4.1 percent since the previous year. Ecuador has large petroleum resources and rich agricultural areas, which the governments rely on. Gas sales are centred around the manufacturing industry (around 62 percent of all gas sold is believed to be required by this market) although the chemical industry (which includes refining processes) takes 11 percent. Healthcare usage is slightly lower at 10 percent and finally metallurgy and food use 6 percent of output each.
Bolivia is the poorest country in this region, despite being rich in natural resources and owning the second largest natural gas field in South America. It's GDP last year was $11bn, up 4.5 percent on the previous year. Gas sales were also on the increase with figures reaching $190m, up 19 percent. This leap was fed by sales to manufacturing concerns of around 53 percent of gas used followed by the chemical industry at 26 percent and healthcare at 16 percent.
Uruguay has a middle-income economy that is reliant on exporting agriculture, a well-trained work force and high levels of government spending. It currently reports a healthy GDP of around $37.54bn, which has increased by 7 percent in real terms in the last twelve months. The industrial gas market is dominated by the manufacturing industry, which took more than half of output in 2006. Also in the same period healthcare accounted for 15 percent and the chemical industry 12 percent whilst metallurgy and food also made a small showing.
The landlocked country of Paraguay is very dependent on Brazil and Argentina and is a major trading partner of both countries. GDP in total is estimated at $9bn for the country in 2006, a growth of 4 percent. Manufacturing is again a key market for industrial gas and provided 82 percent of sales last year with the only other significant market being healthcare (15 percent).
This region accommodates the countries of Belize, Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, and Panama. Across these areas as a whole, sources say GDP totaled $66bn and industrial gas revenues reached $760m. Again manufacturing dominates with 67 percent, whilst healthcare pulls into second with 14 percent while food applications, the chemicals industry and metallurgy represent 6 percent, 5 percent and 2 percent of the market respectively.
Looking to the activities of the major market players, most of the most recognisable names in the industry are present in the region though the scope and depth of their operations vary.
Praxair is among the largest operations with a 17 percent total market share and sales in 2006 of $1.2bn. This is comprised of sales accounting for well over half of Brazil's gas needs, over three quarters of Bolivian supplies, just under half of Peruvian sales and around a third of business in Argentina, and the same in Colombia. They also account for a quarter of Uraguay's gas needs, around 16 percent of Venezuelan sales and have a small share in Chile.
The Linde Group maintains a similarly strong chunk of gas business in South America with an equal share of the business at 17 percent. This includes, 62 percent of sales in Ecuador, around a third of business in Colombia, 28 percent of Venezuelan and Uraguayan sales, a fifth of sales in Chile and Brazil, Peru and Argentina come in at 13, 14 and 15 percent respectively. Gas sales for last year returned the healthy figure of $477m.
Air Liquide figures put them just below their European rivals with a 13 percent market share for the region. This includes their position as the principal player in Argentina with just under half of all business and a third share in the market in Uruguay. They also have footholds in Chile and Brazil with 13 percent. The smaller regions of South America classified as other, are a heartland of Air Liquide's South American business where they hold half the market. Sales for the 2006 period are believed to be around $407m.
Since the merger with Linde in 2006 BOC have divested many of their South American operations (such as Indura in Chile - see main interview) but figures for 2006 show their influence included operations in Venezuela (38 percent), Colombia (16 percent) and Chile (9 percent). This totals a 5 percent share of the market as a whole and produced 2006 sales of around $139m.
Air Products match BOC in the South American market share at 5 percent though they boast slightly lower sales at $128m in 2006. This return comes from an 8 percent share in the lucrative Brazilian industries and a 4 percent share in Argentinean industrial gas sales.
Messer has been involved in South American for some time though their operations tend to function as autonomous units. They have stakes in Peru and Cuba, with sales of around $9m in 2006.
South American also has a vibrant independent market with areas such as Chile believed to have operations accounting for slightly under half of all business in the country. Peru and Ecuador have figures comparable to each other with 27 and 25 percent respectively of independent company revenues, whilst Central American figures claim just over a third of all business goes to those who go it alone. Finally, Bolivian independents account for 11 percent of the country's business and looking to the region as a whole 9 percent of sales are attributed to companies outside of Tier 1.
Regional gas use is dominated by manufacturing, (through factory based production), metallurgy (a growing market due to good reserves of the natural resources required) and the chemicals industry (perhaps due to oil refining operations). Healthcare is also a high demand area and this could be seen as a result of moves towards better healthcare systems favoured by the region's socialist governments. Food applications also make a good showing and as disposable incomes increase through development this is a market that should grow in years to come.
Looking at regional market composition Praxair accounts for just under half of all industrial gases sold. Not to be left behind Air Liquide and Linde's market share, though not as vast, still provides a steady flow of income and continues to grow. Independent distributors and producers are also a feature of the South American landscape, with a share comparable (if considered together) to Linde or BOC.
Looking to the future, with an increase in disposable income through economic development (a key priority for many South American governments) it is likely the resultant increase in demand for services, construction, healthcare and manufacturing should continue to push the market for years to come.