Industrial gases buyers are concerned with supply, future higher prices
Purchasers of industrial gases believe prices may continue to rise because of tight supply at a time of solid, if not accelerating, demand.
By Tom Stundza -- Purchasing, 4/10/2008 6:00:00 AM
Purchasers of industrial gases believe prices may continue to rise because of tight supply at a time of solid, if not accelerating, demand from mining, manufacturing, chemical process and energy markets. Three-quarters of the buyers polled see continuing problems with supply, especially for such gases as argon and helium, and future higher prices.
Praxair boosted prices earlier this year by 10–20% for nitrogen, oxygen, argon, hydrogen, and carbon dioxide and by 15–30% for helium. The Danbury, Conn., company cited "escalating energy, logistics, and other operational costs as well as current supply/demand imbalances"—which buyers say means "increasing demand and decreasing supply."
"The production capacity of manufacturers is maxed out at this time," says a buyer, who has been told by suppliers that capacity additions "are being considered" but not yet approved. "Demand is growing with limited new capacity for some gases," says another buyer. "The result is high prices and increased difficulty to ensure supply."
One new plant, the joint Matheson Tri-Gas and Air Products & Chemicals 200 million standard cubic feet/year liquid helium plant near Big Piney, Wyo., won't open until sometime in 2009. Also coming later is the Air Liquide expansion of its Gulf Coast hydrogen production and storage system in Texas.
Users receive gas products via pipelines, tanker trucks or cylinders. Eighty-one percent of the North American buyers of such gases as oxygen, nitrogen, argon, acetylene, helium, hydrogen and carbon dioxide reported paying higher prices in the past year. Of those buyers, 95% say they also have been paying higher transportation prices for delivery. Also escalating in price are tanks and cylinder rentals for medium-to-small-volume purchases.
Buyers of gases polled come from numerous end-use sectors, such as pharmaceuticals, adhesives, mining, chemicals, glass, ceramics, building materials, food processing, plastics resins and plastics parts, rubber, paint, metallurgy, semiconductors, water treatment, medical, environmental and transportation.
Looking at their purchasing costs, 48% are concerned that the recent consolidation of the supply base into five major suppliers—Linde Group, Air Liquide Industrial U.S., Air Products & Chemicals, Airgas and Matheson Tri-Gas—has been and will remain a supply-chain problem.
Sixty percent of those responding specifically cited the lack of competitive supply from the mergers and acquisitions of the recent past—and the resultant higher prices. "There isn't enough competition to moderate pricing in the marketplace," says one buyer. "Mergers create a monopoly and prices increase due to less buyer leverage," says another buyer.
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