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By Paul Nesdore
Prices and the Industry
The Fed regards current inflation as being at an "
even to the extent of substantially lowering interest rates. However, one
wonders what the definition of "acceptable" is, considering the
double-digit price increases posted by the major gases companies this year.
Industries that use these gases in their manufacturing are many. They run
the gamut from metals production, chemicals, plastics, glass, all sorts of
construction materials, crude oil, electronics and semiconductors, to medical
oxygen and rare gas mixtures for excimer laser eye surgery. This must raise
the prices that those manufacturers charge for their products. Let's
take a closer look at a few of the 2007 price increases.
On April 1, 2007, Airgas increased pricing on packaged and bulk gases as well
as other products. Increases averaged 10%-15% for major industrial gases such
as oxygen, nitrogen, and argon; acetylene and other fuel gases; specialty gases;
process chemicals and rare gases; medical gases; nitrous oxide, carbon dioxide,
hydrogen,and dry ice. Helium, nowat aworldwide scarcity, had increases of 15%-25%.
In addition to price increases for gases, Airgas also jacked up rental rates
for cylinders and bulk tanks and even service charges by 8%-15%. This was followed
by another announcement for additional price increases effective December 1,
2007 of 20%-30% for helium and 10%-15% for argon and all other, 8%-10%.
As of June 1, 2007, Scott Specialty Gases announced an across-the-board increase
for all specialty pure gases and gaseous mixtures. Pure helium and argon as
as helium and argon mixtures were raised 10%; pure methane and methane-based
mixtures increased 7.5%; and all others by 5%.
Not to be left out, Air Products increased prices effective October 1, 2007
on certain high-purity process chemicals in North America. Increases of 5%-10%
for drums and 13%-18% for bottles were announced.
And the reasons for the increases are a broken record. "Higher electricity
and energy prices have led to substantial increases in product costs,"relates
Airgas in its announcement. Scott succinctly
stated, "Escalating costs of energy and quality raw materials are cited
as the drivers behind the increase." Air Products blames "...escalation
in raw material prices, especially those which are influenced by volatile energy
prices." Jeff Handleman, Air Product's General Manager of HPPC business
at its Electronics Division described the causes in a Podcast as: oil prices
at a record level; feedstocks, solvents, fuel, and logistics cost escalation;
and the dollar's battle with the Euro and the Yen. Quite a list!
Still the gases industry seems to be prospering.
BCC Research, which published their updated study The Global Industrial Gas
Business in February 2007 , states that the global industrial
gas market was at $29.2 billion in 2005, $30.9 billion in 2006, and is now
projected to reach almost $40 billion by 2011. This growth was calculated
using an estimated CAGR (compounded annual growth rate) of 5.2%.
A breakdown (see graph) shows chemical and refining-related
processing at the greatest level of growth, achieving approximately 34.3%
of the total market share in 2006 ($10.6 billion) and a projected 33.8% in
2011 ($13.5 billion). The electronics sector is smaller at an estimated projection
of $6.9 billion in 2011, but having the highest growth estimate of 7.2%.
By geographical sectors, Europe had 34% of the
total global market in 2005 but this is estimated to drop to 32% by 2011.
Not surprisingly, North America ranks second with 32% of the market in 2005
and a projected 31% in 2011.
It seems to be a pay-as-you-grow scenario. But,
as usual, this "pass-along-the-cost" dynamic, terminates at the
end-users' pocket books. My next automobile will cost more because the
welded parts use acetylene, which costs the manufacturer more as well as
the plethora of electronics parts, each component costing more to the manufacturer
because of the double digit increase in electronic gases, etc. Well, as the
Spanish say, "Asi es la vida."
- BCC Research, "The Global Industrial Gas Business," Report
ID: CHM041B, Published: February 2007, Wellesley, MA, 866- 285-7215 or email@example.com.
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