Regional Markets – Focus on: South America


When considering the make-up of the South America industrial gas market, we’re exploring the revenues of Brazil, Argentina, Chile, Columbia, Venezuela, Peru and a host of other less financially significant gas industries.
Like so many regional markets, South America found itself under considerable pressure last year as 2009 industrial gas revenues for the region as a whole declined around 9%.
A return to growth is expected this year, though relatively marginal, and year-on-year growth is forecast to continue through to 2014.
So what does all this mean? Crunching the numbers, we see that the high levels of 2008 saw South America register its peak in terms of revenues, with the market valued at approximately $3.7bn. However, with the aforementioned decline of almost 10% in 2009, revenues contracted to just over $3.4bn last year.
Hardest hit on an individual basis was Uruguay, having seen its revenues decline by 12% over 2008. Even the largest and most prosperous of Latin American industrial gas markets, Brazil, witnessed a double-digit decline of 10% over 2008. Likewise, Argentina saw revenues reduce by 10%.

Out in front
Despite those double-digit drops, Brazil and Argentina are still the largest and most revenue-rich industrial gas markets in South America.
Brazil continues to dominate and is clearly way out in front of its Latin American peers, benefiting from its strong agriculture, mining and manufacturing sectors. The country has typically boasted a robust GDP level and the largest market in the region of late – rising from gas revenues of $1.4bn in 2006 to just under $1.8bn in 2007, a very healthy year on year growth rate of 20%.
This was reinforced even further in the boom year of 2008, when revenues reached just over $2.1bn. However, with the 10% fall in revenues in 2009, the market was pegged back to a value of $1.9bn by the year’s end.
In terms of forward-thinking, the outlook ahead appears bright for Brazil; the country was thrown into the energy spotlight following two major offshore discoveries in 2007 and is prospering from oil and gas exploration. With the solid foundations laid, all eyes will be on Brazil’s other emerging growth drivers such as energy and steel.
Typical of South America as a whole, both Argentina and Chile are rich in natural gas reserves and mineral resources and comfortably occupy second and third place in the Latin America hierarchy respectively.
Argentina, which experienced an industrial gas sales slump from $427m in 2008 to $383m in 2009, makes up around 11% of the South America gases business. Meanwhile Chile, worth $311m in 2009 revenues compared to $327m in 2008, comprises 9% of the region’s market overall.
Both countries have experienced difficult economic times in recent years and industrial gas businesses that have struggled to make significant strides forward as a result, which may have become even more of a struggle for Chile, given the chaos caused by this year’s devastating earthquake and closure of certain copper mines.
In terms of the best of the rest, Columbia has perhaps observed the least damaging fall in revenues, at just a 4% contraction in 2009. Sales fell from $249 in 2008 to $238 in 2009, yet the country still occupies a 7% share of the market and it’s a sign of its growth & resilience in recent years that the revenues decline was limited to just 4%.
Venezuela and Peru comprise the remaining major players by country, though sales falls of 7% and 9% respectively were seen last year. Slumps were also seen across the less significant South American gas markets of Ecuador, Bolivia, and of course Uruguay, though Paraguay remained flat and experienced neither expansion nor contraction.

But let’s look at the positives: a return to growth is expected for the region in 2010 and by the end of the year we could be looking at an industrial gas market worth just under $3.6bn.
It would be a positive upturn for the region of an estimated 5% and initial modeling suggests this is a trend that could continue over the next four and a half years, as South American industrial gas revenues reach an anticipated $4.8bn in 2014.
Early forecasts from the Spiritus Group make for interesting reading, as we can chart a return to the high levels of 2008 by the close of 2011, when the region boasts a gases business worth around $3.8bn. Reading the expected compounded annual growth rates (CAGR), we see that the market will grow to $4.1bn in 2012, $4.4bn in 2013, and the aforementioned $4.8bn by 2014.
When expressed over a five year forecast period, taking into account the slump in 2009, we see that the region appears to demonstrate a CAGR of 7.3% for the period 2009 – 2014. That compares to a CAGR of 17.3% from 2003 – 2008.

By company
When it comes to South America, there’s certainly one major gas player that springs to mind – Praxair.
Praxair and its subsidiaries, including White Martins, account for over 40% of the Latin America industrial gases business, with revenues of just over $1.4bn and the bulk of which are gleaned from the Brazilian market.
Linde and Air Liquide, with regional revenues of $741m and $498m respectively, comprise around 21% and 15% of the market, while Air Products accounts for around 7% or $250m in revenues.
Interestingly, it’s actually still a market with a strong presence from the independents. Of the South American market’s $3.4bn value in 2009, upwards of $2.8bn of this was revenues generated by the recognised industrial gas majors, and a further $561m were generated by the independent producers and distributors.
This breaks down further as, $349m in independent producer revenues and $157m by independent distributors.

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