Prices, supply getting more stable
Wayne Forrest -- Purchasing, 4/6/2006 2:00:00 AM
Increased capacity and more even demand should keep industrial gas buyers happier this year after a roller-coaster 2005.
like many chemicals markets, the industrial gas market is still recovering from the 2005 hurricanes in the Gulf Coast. Industrial gas prices, particularly hard-hit hydrogen, are gradually returning to more stable levels in early 2006 after spiking in the second half of 2005. Long-term expectations are for prices and supplies to hold steady, as suppliers bring more facilities currently under construction online this year.
According to the Freedonia Group, demand for industrial gases in the U.S. will grow at an annual rate of 3.2% to approximately 80 billion cubic meters in 2009, bringing the market value to approximately $7.5 billion. Freedonia analyst Bill Baumgartner cites increasing growth in the electronics and healthcare industries as primary drivers of the anticipated advance, while strongholds like metals and chemicals will continue pushing demand and capacity plans.
In addition, environmental regulations will play a role in heightened demand in the short term. "Many developing green applications for industrial gases will show the greatest growth first," Baumgartner said. "For example, in the U.S., the requirement to switch to low-sulfur diesel fuel will boost the demand for hydrogen."
Hydrogen shortfall
The U.S. hydrogen supply took a temporary hit last September, following Hurricane Katrina's wrath on the Gulf Coast. Air Products' industrial gas complex in New Orleans sustained extensive wind and water damage from the storm. At the same time, the company's Sarnia, Ontario, Canada facility was shut down due to a planned suspension of a supplier's feedgas. Air Products found an alternative source and resumed partial operations in mid-September, alleviating some of the hydrogen shortfall in the North American market.
Robin McClain, senior corporate procurement agent for Chicago-based Midwest Generation, tells Purchasing that hydrogen has been the only industrial gas that "has given us a problem in the last six to eight months," due primarily to weather-related issues along the Gulf Coast.
Midwest Generation, a subsidiary of Edison Mission Energy, owns and operates six electric power generating facilities in Illinois, supplying electricity primarily for the wholesale market. The independent power producer consumes approximately 30 billion standard cubic feet of hydrogen annually. McClain says that prices have stayed between $3.40 and $3.60 per 100 standard-cubic-feet, but even that range is 40¢ greater because of a current natural gas surcharge.
"I am hoping that hydrogen will come down as capacity increases and there are no more spikes in our fuel charges, such as oil, natural gas or diesel," he says. "As long as capacity is online, too, I think hydrogen will level off."
Midwest Generation also is a large consumer of nitrogen and carbon dioxide. It purchases approximately 25 million standard-cubic-feet of nitrogen per year at 25-29¢ per 100 standard cubic feet, while consuming some 6,500 tons of carbon dioxide annually at $75-$80/ton.
Capacity expansions
But hydrogen suppliers already are ramping up production capabilities. The soon-to-be-acquired BOC Gases (see sidebar) is expected to have two new hydrogen facilities on-stream in Lima and Toledo, Ohio, by the middle of this year, increasing the Murray Hill, N.J. company's U.S. production total to 175 million standard-cubic-feet a day.
Praxair is building a hydrogen facility to supply two oil refineries in Texas. Air Products brought hydrogen facilities online in Louisiana and Texas in January. The two plants are among six operations Air Products is bringing on-stream in the U.S. and Canada over a 10-month period.
Air Liquide U.S. recently struck a deal with ConocoPhillips to build a 120 million standard-cubic-feet per day hydrogen-producing steam methane reformer (SMR) located at ConocoPhillips' refinery in Rodeo, Calif. The new unit, scheduled to be completed by mid-2008, will supply the existing and future requirements of the Rodeo refinery and provide the foundation to support future hydrogen opportunities that are anticipated in the San Francisco area.
Air Liquide also has a new hydrogen SMR under construction in Bayport, Texas to supply a ConocoPhillips refinery. A company statement said "Air Liquide's pipeline network will provide ConocoPhillips with hydrogen needed to produce new ultra-low sulfur diesel fuel. The remaining hydrogen from the new SMR will meet the increasing needs of Air Liquide hydrogen network customers, especially existing and new petrochemical customers along the company's Gulf Coast pipeline system."
Beyond hydrogen, industrial gas suppliers are adding capacity. In late 2005 Praxair announced it was expanding its industrial gas production facility in Loveland, Colo., in response to the growing demand from oil and gas production customers in the region. The project is expected to start up by the fourth quarter of 2007 and will produce up to an additional 300 tons per day of liquid oxygen, nitrogen and argon. Praxair in February opened a new packaged gases production facility in Tacoma, Wash.
Outlook
Freedonia says in the next five years any industrial gas shortages in the U.S. likely would be temporary and due to natural disasters. Metals production and fabricating will continue to be the largest market for industrial gases, accounting for 31% of total demand in value terms in 2009.
Consumption of industrial gases in chemical processing and petroleum refining markets, the second largest outlet for gases, will increase 5.4% per year to more than $5 billion in 2009. Freedonia says gains will result from the increasing use of oxygen and nitrogen in chemical processing applications (primarily to improve the environmental performance of chemical operations); and the growing use of hydrogen in petroleum refining operations (in response to higher demand for lower sulfur motor fuels).
"Over the next year or so, I don't expect any significant supply problems," says Baumgartner. "That will keep prices from rising too much."
The electronics industry will fuel 5.7% of the growth per year to more than $800 million in 2009, as manufacturers and suppliers return to pre-millennium growth. The food and beverage markets are expected to contribute 3.8% annual growth to bring 2009's forecast to $590 million.
Metals stays on top
(World industrial gas demand by market segment, $ millions)
| 2009 | 2014 | |
| Metals | $9,510 | $12,020 |
| Chemicals and refineries | $5,025 | $6,505 |
| Food and beverage | $3,370 | $4,195 |
| Electronics | $3,635 | $5,235 |
| Health and medical | $1,710 | $2,455 |
| Other | $7,150 | $9,290 |
| Source: The Freedonia Group | ||
China seeing strongest growth
(World industrial gas demand by region, $ millions)
| Source: The Freedonia Group |
||
| 2009 | 2014 | |
| North America | $8,870 | $11,220 |
| Western Europe | $7,090 | $9,000 |
| Japan | $3,675 | $4,405 |
| China | $1,615 | $2,500 |
| Other Asia/Pacific | $4,520 | $6,345 |
| Other Regions | $4,630 | $6,230 |
-
To whom this may concern:
I am researching for my second patent relating to CO2 and H2 production methods and costs.
I am very pleased with your 2006 article.It has hepled immensely to determine feasibility.
I request a small bit of data regarding the production rates and costs of hydrogen electrolysis, or the name of a company that I may contact.
Regards,
Anthony
Anthony Graziani - 8/24/2008 6:24:00 PM EDT
Now Playing: 