The spotlight has shone on industrial gas business models and trending gases this morning at the Renaissance Kuala Lumpur Hotel – the venue for gasworld’s fourth industrial gas conference in the region.
The clock has just passed 1.30pm local Malaysian time and delegates have retired to the hotel’s R-Stage function room to enjoy a lavish lunch break sponsored by Dohmeyer and Taylor-Wharton.
The multi-cultural themed lunch features dishes from all corners of the world including Malaysia, China and India.
Day one has so far played host to an array of different presentations, all linked by one common theme – Business Models & Tools for Success.
Giving the keynote speech, John Raquet, gasworld’s CEO and Publisher, gave an update on the global industrial gas markets, tracking their performance and focussing on the Asia-Pacific region.
“Let’s go back to where I first started analysing the business. I began in the industry in 1981 and over that time I have been monitoring the gases business growth.”
“Back in 1980 the global gases business was worth $8.5bn in value; in 2017, you can se that figure is around $73.5bn. That’s huge growth.”
“One thing about our industry is that we are a very robust industry. During this 30+ year period, we have only encountered one recession, back in 2008 when everything came to a strandstill around the world. This was the only time that we have actually seen a decline in the gases business.”
“The important factor along the way is that a number of major gas companies have obviously helped to develop this business, but a number of them have disappeared along the way too, as they have been acquired at different (BOC, Airgas, Big Three, Liquid Carbonic, AGA). This is prior to what has just happened with Praxair and Linde of course.”
Raquet proceeded to explain the performance of the industry in 2017, noting that the industry was worth around $73.5bn in industrial gas revenues and included:
Turning the attention to the nine months of 2018 reported to date, he added that:
Highlighting the significance of the Asia-Pacific region to this performance, Raquet explained that according to gasworld Business Intelligence, the North Pacific Rim gases business accounts for 26% of the global market today, while the South Pacific Rim market accounts for a share of around 6% and growing (North America - 32%; Western Europe - 21%).
Raquet concluded, “What we want to do for the next two days and over the next session in particular is look at various operational modes and business models, and how to run a sustainable and successful business.”
Session one, entitled Industrial Gas Business Models, was chaired by Edgar Hotard, Venture Partner at ARCH Venture Partners and Senior Advisor to Shanghai Baosteel Gases.
Rachmat Harsono, President Director of PT Aneka Gas Industri, opened the platform for discussion and debate as he explored the traditional route for building a sustainable industrial gas business.
“The Samator Group was started in 1975 by my father Arief Harsono. I am the second generation. My father saw this guy doing welding and cutting and asked ‘where does this come from?’ and the guy tells him ’Singapore’. So he thought this must be a good idea to jump into.”
In 1981, Samator built its first ASU plant in Gresik, East Java and initiated its first filling station. In 1990-1991 it built two more ASU plants in Kendal, Central Java and Bekasi, West Java. In 1993-1995, Samator established the business outside Java, as well as tapped into engineering, procurement and construction (EPC), including medical gas installation.
In 2004, the family company acquired PT Aneka Gas Industri (AGI) previously a state-owned enterprise.
“In 2016, we saw some opportunities to acquire other companies and we did. We opeed them as business units. Now in 2018, we operate in seven different groups - finance, industrial gas, healthcare, EPC, logisitic (500 fleets all over Indonesia), chemical and property (hotels, eco resorts).”
Harsono explained to delegates the company has a vision to be the most desirable company that continuously grows and expands by utilising natural resources for the benefit of life. “We are trying to grow and expand beyond industrial gas.”
Aneka Gas is the first and largest industrial gas company in Indonesia. It is a market leader in the medical gas sector, has a well-diversified end customer base, nationwide distribution network and experienced management team.
“We are evolving so we now call ourselves Samator 4.0. Today, we have 44 plants and 100 filling stations.”
Next to the stage was Tim Evison, Director of Messer Consulting Singapore and Senior Vice-President of Group Business Development at Messer Group.
He gave an insight into trade and industrial gases in ASEAN (Association of Southeast Asian Nations) telling delegates, “Trade is vital to ASEAN and ASEAN is already a key part of global supply chains.”
“ASEAN is the fourth-largest trading region in the world after China and the US. The EU is actually the biggest if you add all of the countries together, but ASEAN is very important to world trade.”
“As you can see from the figures, the ASEAN region is very different to the EU, trading substantially with all other regions of the world and less so with itself,” he added. “In ASEAN, industrial gas trade is significant. The total bulk gases trade in ASEAN, including helium, is worth over $100m, and there are several companies that are doing quite well in that space.”
“There are several products that are moving down from China into ASEAN and particularly coming to or through Singapore. This is certainly a business model that works well and has every prospect of growing well in the future.”
Continuing to describe the factors driveing growth in the region, Evison said, “Moreover, the global centre of consumer demand is moving to Asia – and with it more manufacturing investment. Disruptions to trade between US and China may even accelerate this trend.”
“If you look for example at a recent study from the Brookings Institute in the US, they say we are looking at an unprecedented expansion of the global middle class.” Quoting the report, he explained, “We are witnessing the most rapid expansion of the middle class, at a global level, that the world has ever seen.”
“If you look at the spending that comes from the middle class (globally), the huge growth that is seen in the next few years is in Asia. Five in every six billion dollars will be spent here, it is estimated.”
“When you’ve got the situation that major consumer markets are coming to ASEAN, then it is natural that the major investment in production follows. You get the huge projects like the RAPID project; these present substantial opportunities for the gases industry,” he affirmed.
“Manufacturing in ASEAN is growing, with electronics, chemicals, and metals production – all very gas intensive industries. Across all of those, you see the growing demand for pipeline gases and onsites. Whether it’s the new installations going into steelworks or the investments being made at the RAPID project in Malaysia, or the onsite installations that are some of the largest installed for electronics customers, you are seeing substantial demand for onsite projects.”
Discussing the business models for success, Evison explained, “To my mind, the industrial gas business has at least a dozen or more business models that make good sense and within each business model you can find industrial gas companies that are finding the fruits of those models.”
“Within ASEAN today there are five business models that make good sense,” he added, describing these as:
Concluding, Evison said strong growth in demand for industrial gases in ASEAN is foreseeable. “The geography of trade in ASEAN and the need for cost optimisation ensure that the intra-regional trading of bulk gases by sea will increase.”
Sheng Zhongke, Shanghai Baosteel Gases’ CEO, rounded off the session by providing an overview of how to build a sustainable industrial gas business in China.
Shanghai Baosteel Gases, owned by Baosteel Group and Warburg Pincus, was founded nine years ago and became operational eight years ago. The company’s annual revenue in 2018 will be $500m. Its annual growth rate over the past eight years is 40%. Zhongke said the forecast for 2019 to 2021 will still remain at 30-40% growth rate.
51% control of Shanghai Baosteel Gases was recently sold to PAG private equity by Baosteel Group and Warburg Pincus. The company will eventually merge with Yingde, also controlled by PAG.
“After the merger, we will become one of the four largest industrial gases companies in China along with other Tier One companies. The strategy of Shanghai Baosteel Gases is to grow merchant business mostly through end user contracts and continued new organic growth through M&A and de-captivation.”
Concluding, Zhongke said, “We have a vision as a merged company to become the largest and most profitable industrial gases company in China. We will do this through consolidation opportunities in the next three to five years, syngas opportunities, hydrogen energy opportunities in China and IG on-site opportunities still remaining.”
All of the panellists then proceeded to debate these different business models, their merits and their place in the industry/region.
After a short coffee break, delegates and speakers returned for session two, chaired by Saket Tiku, President of All India Industrial Gases Manufacturer’s Association (AIIGMA).
Jonny Dearden, Senior Business Analyst for gasworld’s Business Intelligence division, explained to the delegates the global helium industry and the role that Asia will play, as it is now the largest area of end user demand. Supply and demand are currently in a tight balance and a major source of helium - the BLM pipeline - is now drawing to a close.
“Supply and demand are in a tight balance,” Dearden said. “Both are matched at an annual 6.2 bcf. This follows demand growth from 2017’s slight surplus when demand was at 6.1 bcf. As a result, what was already a fragile supply chain is left ever more open to disturbance.”
“Asia is now the largest market for helium demand at 2.1 bcf, surpassing the US which has an annual demand of 2 bcf.”
“China will continue to drive APAC growth. It currently accounts for 33% of global helium demand and this is expected to grow by an annual average of 5-8% over the next 5 years.”
“The BLM has held its FY2019 and final annual helium auction, in which we saw prices reach a 135% increase over the FY2018 auction.”
“The BLM’s helium assets, including the remaining helium in the Federal Reserve must be privatized by no later than 30th September (2021). This will greatly impact global supply as no major sources of helium will come onstream until 2021. This will leave the market fragile to any delays or disturbances that have become common in the industry.”
Dearden then looked to new facility projects and their future end user markets.
“Although future demand growth will largely be built upon current end-use sectors there is room for innovation. A stable helium industry will be required to build a future powered by ever more powerful supercomputers that support ever more powerful AI and a future that includes the continued exploration of space.”
“Helium is a finite resource and needs to be treated as such. Demand growth could be slowed (or reversed) if helium prices spike due to tight supply.”
“In the face of tight supply - now is the time to continue to exploit recycling and reuse opportunities on the end-user side. In the long-term a responsible and conservative approach will lead to a more sustainable future for the industry.”
“I’m here to talk about one of the hottest topics in manufacturing these days,” said Dr. Mathias Kranz, Global Head of Application Technology at The Linde Group, as he took to the stage to discuss Additive Manufacturing (AM).
Kranz covered the Tier One company’s dedication to technology and innovation in general and said AM is emerging as a new opportunity with ample uses for industrial gases.
He explained the AM value chain along powder production, powder handling, 3D printing and post processing and how Linde is set up to address the emerging opportunity and how the company is focusing on building a strong partner network.
Kranz said a couple of challenges lie ahead in the future for AM and listed them as:
He stressed the industry has to think outside of the industrial gas space and ended his presentation by leaving delegates with a quote from Reid Hoffman, Linked In Co-Founder, “No matther how brilliant your mind or strategy, if you’re playing a solo game, you’ll always lose out to a team.”
Alan Kneisz, Hydrogenics’ Business Development Director, reviewed where hydrogen-based technologies are making active inroads, primarily into the transportation sectors and markets that see the most promise.
Kneisz’s presentation outlined the solutions and some of the future markets with cost reductions that reveal how hydrogen and fuel cells will be the dominant energy carrier in the near future.
He emphasized the need for alternative low carbon solutions, “The science is clear, we need to move off fossil fuels there is no debate anymore. Seven million people die per year from particulate matter and the downtown areas of London, Paris etc are just as bad as Beijing.”
“On a large scale, hydrogen production and fuel cells can be as affordable as conventional fuels. Hydrogen can be developed and created locally and allows for energy security.”
Kneisz gave a hydrogen economy update from a global perspective and said renewable energy is now cheaper than fossil fuels on a large scale.
“Fuel cell transport and use of the hydrogen is expanding extensively. In China fuel cell buses are being deployed in the thousands, in Japan there are now 100 fuelling stations, in Europe hydrogen transport is widely available (trains, buses and cars), in Korea 250MW already working for power applications, and in Australia there is $120m in grants for hydrogen projects.”
Kneisz read a quote from the Hydrogen Council, the first global initiative of its kind that aims to position hydrogen among the key solutions of the energy transition, “Deployed at scale, hydrogen could account for almost one-fifth of total final energy consumed by 2050.”
“This would reduce annual CO2 emissions by roughly six gigatons compare to today’s levels, and contribute roughly 20% of the abatement required to limit global warming to two degrees celsius.”
The final speaker of the morning was Guangdong Huate Gas’ International Business Sales Manager Andy Lao, who gave his presentation on Electronic Specialty Gas Market and Opportunities in China.
Lao discussed the electronic specialty gas market in China and talked about the position of local independent specialty gas companies in the country and how these are likely to fair with the likes of bigger, multinational gas players.
Day one will continue at around 2.45pm local time after lunch and dedicated networking time around the exhibition area.
Stay up-to-date with all the latest news, views and developments at the Asia-Pacific 2018 conference via the gasworld website, updated throughout the two-day event.
gasworld will also be tweeting live updates during the conference, which you can follow on Twitter using the hashtag #GWAsia2018.
A full review of the conference will be published in the first print edition of gasworld Global’s 2019 magazine.