The main factors that drive demand in the bulk distribution equipment industry are mainly new business and organic growth, the replacement of ageing equipment, and any new applications that arise for distribution equipment.
As with the industrial gas industry itself, new business and organic growth generally depend on economic expansion as the main driver for growth in the demand of bulk distribution equipment. Economic growth generates an increased demand for goods and services from the commercial, industrial and manufacturing sectors, generating an increase in industrial gas demand and therefore for the equipment needed for distribution and storage. In recent years, the emerging markets have provided the lion’s share of new business growth.
For more than a decade, emerging markets have presented the highest potential for growth and all of the major multinational industrial gas companies without exception have significantly invested in these markets. As a consequence, emerging markets also present key opportunities for manufacturers of distribution equipment.
This evolution has transformed the cryogenic storage and distribution industry with an increase in demand for competitive, reliable equipment manufactured in proximity to the markets served by the major multinational industrial gas companies. This trend has shifted the supply flow of distribution equipment, historically from North America and Europe to India and China, who have become global cryogenic equipment ‘hubs’.
But because overall demand itself is subject to the cyclical nature of the markets, again like the industrial gas industry itself, manufacturers of bulk distribution equipment have to mitigate the effects of cyclicality in any particular business sector or geography – even the emerging economies – by providing a unique and diverse product offering, all the while supplying from a global platform.
Mitigating cyclicality in traditional markets is of course new business or applications, and a prime example is the momentum right now in the LNG sector.
Historically, demand for bulk distribution equipment was closely linked with the industrial gas industry itself. Inside the industry, increased demand for more recent applications such as microbulk have created a lot of new growth opportunities globally. Other drivers have been the actual individual growth strategies of the industrial gas companies, including their strategy towards fleet renewal and replacement.
Fleet renewal represents a real opportunity for growth simply because of the sheer scale of the renewal that must be achieved in the coming years; in each of their traditional markets, many leading gas companies find themselves with several hundreds of vehicles operating globally that are more than 30 years old and must be replaced in the coming years. This fleet renewal is bringing with it several benefits for the industrial gas companies, in particular in improved safety and efficiency. And in today’s extremely competitive, tight-margin market, where industrial gas has become commoditised and distribution costs weigh heavily in the total product cost, the pressure to improve operational efficiencies in distribution has never been more critical.
However, the increasing demand outside the traditional industrial gas industry in recent years, for LNG, has been a key driver in the increased demand for the type of cryogenic distribution equipment that we supply. The small and medium-scale LNG industry requires similar types of solutions – moving LNG from the source by ships, cryogenic semi-trailers and ISO containers to LNG storage tanks for the use as fuel. As a result, LNG is becoming something of a golden ticket in the quest for organic growth in the bulk distribution equipment market.
Michael Blondin is in charge of Global Sales for VRV’s Cryogenic Division and has worked in the industry for more than 20 years.
With nearly 60 years’ experience in the design and manufacture of highly engineered pressure equipment from multiple sites worldwide, VRV is one of the world’s leading suppliers to the global cryogenic, healthcare, energy and petrochemical industries.