China analysis 2006


The Chinese industrial gases market reached $1.7bn in 2005, an increase of 20 per cent over 2004. According to Spiritus Consultings latest analysis of China gas demand has been particularly high in the steel and petrochemical sectors as well as in the fast growing electronics sector. The consultancy forecasts that the market will grow at 19 per cent a year for the next five years to reach $4bn by 2010.

However, valuing the Chinese market is very difficult due to four main factors: the number of joint ventures that exist between international and local Chinese gas companies and between international gas companies and end-users, the problem of local captive gas producers supplying surplus gases to the merchant market and the level of wholesaling that takes place in general.

John Raquet of Spiritus defines the industrial gas market as the supply of gas and services to the endusers. He says that this excludes any gas produced by
consumers for their own use, captive production. “We have recently analysed the last six years of demand in China and conclude that the true gas business in China has grown from $865m in 1999 to $1.7bn in 2005. This represents an average annual growth of 12.5 per cent.

“We have studied the size of the gases business and compared the business to the Gross Domestic Product (GDP), IPI (Industrial Production Index) and several sub-sectors that make up the IP Index. It is clear that the Chinese business has been over-valued in the past but re-assessment of those levels does not take away the fact that the market is a high growth market. In terms of gas intensity, we believe that it is currently standing at 1.0 (factor representing 1/1000th of GDP).”

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