Carbon dioxide (CO2) was a key focal point for Independent Welding and Distributor Corporation (IWDC) members this morning on the final day of the 2023 PurityPlus Annual Meeting.
Presentations from Carrie Roberts, Business Development Manager for HighPoint by Worthington Industries, and Ned Lane, President of CK Supply, covered the highs and lows of the cannabis market, new opportunities for distributors and embracing CO2-related challenges.
In her cannabis crash course, Roberts told PurityPlus attendees that legal US cannabis sales are expected to top $38bn by the end of 2023, with annual US sales expected to exceed $38bn by the end of 2026.
“One in three Americans currently live in a state where cannabis is legal,” she shared.
Roberts believes the coronavirus pandemic (Covid-19) was responsible for a big boom in the cannabis industry. “Cannabis went from being ‘illegal’ to ‘essential’ almost overnight,” she said.
And the legalisation has been on the rise since. In 2022 alone, four more states legalised cannabis, bringing the legalised total to 37 states for medical use and 21 states for adult use. The market is an ever-changing landscape.
This growing trend in cannabis legalisation, leads to new and growing demand for CO2. CO2 is essential for cannabis plants to complete the photosynthesis process, meaning when the demand for cannabis is high, so is the need for CO2.
For companies that grow cannabis plants indoors, concentrations of CO2 are kept at levels between 900 and 1,400 parts-per-million (ppm) to improve yields and shorten the growing season.
When it comes to enhancing growth, Roberts named six ways that growers can add CO2 to the air in a growth area, including via CO2 generators and through the use of compressed CO2.
But it’s not just supplying the CO2 via tanks and bulk tanks that present an opportunity for distributors, there are a number of ways that they can support the market. Roberts named the following as opportunities for PurityPlus members, and wider industrial gas companies, to become involved in the market:
- Bulk cylinders and specialty gases
- Dry ice for processing and flash freezing
- Personal protection equipment
- Fire extinguishers/fire suppression
- Gas detection monitors for CO2 and hydrocarbons
While there are a number of ways in which industrial gas companies can become involved in the market, Roberts highlighted the great importance of cleanliness as leading priority.
“Purity and cleanliness are both critical to the cannabis industry,” she said. “In order to protect human health and safety, cleanliness is paramount.”
How to optimise your CO2business as a distributor
CO2 shortages are unfortunately becoming a regular headwind that impacts industrial gas companies. Demand is going to continue to outweigh supply and challenges will undoubtably lie ahead.
For Ned Lane, President of CK Supply, he doesn’t see shortages going away.
“Hope is not a plan,” he told attendees. “Hoping that there will be enough CO2 this year, or next, is not an acceptable plan. “I don’t see CO2 shortages going away.”
Taking these points on board, Lane said it’s important to identify the challenges and then look at ways you can help your business deal with the challenges to avoid “headaches”.
Putting these headwinds into an equation, Lane highlights, “Increased demand + narrower production + seasonability +aging production assets + driver shortage + political/environmental uncertainty + railroad traffic = headaches.”
It’s no secret that last year was a huge challenge for the market, and while the scale of that struggle isn’t being anticipated again, that’s not to say it will be an easy ride.
“2023 may hold less headaches, but there will still be headaches. The US CO2 demand is 10.3 million tonnes per year, this outweighs supply. Distributors need to think about: where they want to grow, how they’re going to grow.”
So what do distributors need to consider? Lane highlighted the following:
- Do you have single or multiple supply sources?
- Do your terms and conditions match the current and future business climate?
- How efficient are you with your CO2?
- Are your customer tanks appropriately sized?
- Do you have telemetry on your CO2 accounts?
- How many days of inventory do you have on site?
“You need to understand your supplier,” he told the room. “You need to ask your supplier about planning outages, so you’re not scrambling to find loads. You need to learn what their capacity is, and it’s also important to know their history on surcharges and allocations.”
“Distributors need to think about their contingency plan. Look at options for when supply goes down. If you know, it prevents guessing.”