China – is the growth sustainable?


The Chinese gases market grew by 12 percent in 2006 and according to industry analysts, is set to accelerate to over 19 percent per year for the next 5 years. China is the theme of this month’s edition and gasworld investigated further the current dynamics of the Chinese market.

The Chinese industrial gases market reached $2.3bn in 2006, an increase of 12 percent over 2005. According to Spiritus Consulting’s latest analysis of China, gas demand has grown in both the steel and petrochemical sectors as well as in the fast growing electronics sector. The current rate of growth means that this year, China is expected to match the size of the German gases market and accelerate past Germany
to become the 3rd largest gases market in the world.
Investment by the major international Tier 1 gas companies continues to take place, through a combination of gas company owned projects, joint ventures with other major gas companies or joint ventures with the end-users themselves. The Chinese market is becoming ever more interesting to observe as the major international gas companies jockey for position to be the No.1 supplier in China, while Chinese companies continue to look at investing in this business as well (to date there are no significant Chinese gas companies that can challenge the presence of the major internationals).

Also behind the scenes, equipment manufacturers are expanding capacity to meet the ever-growing domestic demand and the realisation that there is an international market to be catered for as well.

Size of market
As discussed, the Chinese market is valued at around $2.3bn. Figure 1, shows the current breakdown of the market by end-user sector. The chart shows that manufacturing is still very much the largest consuming sector for industrial gases (in terms of value) supplied by gas companies. However, the real investment being made by the major international gas companies is in the steel, petrochemicals and electronics sectors.

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