More than 210 delegates have travelled from 16 different countries to hear insights on demand drivers and delivery within the carbon dioxide (CO2) market, at a time where shortage and supply news continues to hit headlines both in the US and in Europe.
“CO2 represents 11% of the overall US industrial gas business and demand currently sits at approximately 10.3 million tonnes per year,” Garvey told attendees. “This demand is estimated to grow at 2.0% per year to 12.2 million tonnes per year, but to support demand growth, a minimum of five 400 tonnes per day plants need to be added by the year 2027.”
Looking at how the CO2 capacity is dispersed across the US, Garvey highlighted that most of the current capacity comes from the Southern US (44%), with the Midwest representing 33%, and the West 20%.
This focus on the CO2 market in 2022 highlights both demand, supply, capacity, source and trends that are hot right now, providing attendees with a comprehensive overview of where the market stands today as the US continues to battle struggles in the crucial market.
When it comes to the food sector, this market represents approximately 70% of demand in the US as of last year (2021), with key drivers being population and geography of food processing plants.
The beverage sector, which has been hit hard in the past months, has witnessed solid growth, according to Garvey, with demand being driven by per capita consumption and climate, paired with the growth of breweries and microbreweries.
Looking at these growing applications, Garvey told attendees, “Capacity growth of 0.7% per year is not keeping up with CO2 demand growth, but there’s plenty of CO2 out there that could be used to improve our situation.”
With that, Garvey was setting the stage to discuss new and other sources to help the market grow and how both end-users and suppliers can help supply chain strains in the market.
“The end users need to act too, it’s not just on the suppliers”, she enthused. Garvey continued, “Suppliers need to work more closely with customers so you can coordinate, increase on-site storage, and make investments to put constituency plans in place.”
“The end users need to start thinking about investing in the supply chain itself. They need to make sure that everyone in the supply chain gets rewarded with a reasonably priced product.”
The Beverage Industry: Pre and Post Covid
Shifting focus to breweries as an end-user, Ray Stout, Illinois Craft Brewers Guild, told attendees that, “The overall beer market is currently valued at $100.2bn and the craft beer market is currently a $26.8bn industry.”
Founded in 1997, the Illinois Craft Brewers Guild is the non-profit trade organisation dedicated to supporting the development and expansion of the craft beer industry in Illinois. When it comes to breweries, and the hospitality industry as a whole, CO2 is used in the brewing process and in carbonating drinks.
The craft beer business is one that is growing in the US and driving demand in the brewery space as expansions from traditional brewing continue to grow. Highlighting this growth, Stout told delegates, “Craft beer sales in the US are up 7.9%, slightly impacted by Covid,” Stout told delegates.”
“Where we have really seen great growth in the industry, is in some other brewery types, such as tap rooms, microbreweries, and brewpubs.”
Comparing these markets from 2011 to 2012, Stout explained that taprooms have grown from 0 to 2,009,993 beer barrels, microbreweries have grown from 1432,034 to 4,560,288 beer barrels and brewpubs from 870,371 to 1,572,167 beer barrels.
Taprooms were illegal back in 2011, explaining the 0 beer barrel output.
Looking at how the coronavirus pandemic has impacted the market, Stout did tell delegates that the pandemic did slow, or in some cases stop, growth. Post-pandemic, however, continued growth has continued to happen.
“We are still seeing more breweries opening than closing in the US, and this was even the case during the Covid-19 pandemic. This market is passed its infant stage in the US.”
CO2 Growth and Supply Challenges: A Distributor’s Perspective
Steve Atkins, Executive Vice-President of nexAir Carbonic, was next to take the stage to provide a distributor’s perspective of the CO2 market.
Highlighting nexAir’s role in the CO2 market, Atkins told CO2 Summit attendees, “In 2022, sales of $1.5bn represented the US CO2 and dry ice market – and nexAir represents a 2% share of that.”
“Based on the current environment, we think that demand will continue to remain strong.”
“The biggest challenge we have is that we don’t have enough CO2. When we have plant outages, we exceed supply, force majeure and allocations mean we just don’t have enough.”
Atkins told delegates that there are new opportunities and new sources in the US that are underground. nexAir is currently looking at these sources to help better support its customers. With this, focus then shifted to better addressing challenges as a business in the market.
On how nexAir is coping with this, Atkins said, “We address these challenges by making investments. In fiscal year 2023, which for us [nexAir] starts October 1, nexAir will be investing $10.3m in our CO2 business.”
Whilst there are obviously great strains being felt in the market, Atkins told attendees that increased efficiency levels are really helping business to best enhance business and add capacity, even in difficult times
Finishing up by highlighting what the distributor space as a whole needs to do to exceed in the market, Atkins concluded, “For the CO2 distributor, it’s all about improving the customer experience. We can make investments, but if we don’t enhance the customer experience it doesn’t mean anything.”
“We need to exceed their expectations and we need to communicate.”
Looking at the market from a customer point of view, Atkins added, “If a customer doesn’t have multiple supplies, then then need to have multiple suppliers and they also need to be considering none-traditional CO2 sources to help ease shortages.”
How/Where to Grow Your CO2 Business as a Distributor
“This is about as rough of a CO2 period as I can remember,” Ned Lane, President of CK Supply, told delegates as he took the stage as the final speaker in Session 1 at the CO2 Summit here in Chicago.
“Planned outages are going to continue. Opportunities will exceed supply. And I don’t expect allocations, surcharges and deliveries days are going to improve in the near future.”
Adding to these strains, Lane also explained that narrower production, seasonality, aging production assets, driver shortages, political and environmental uncertainty and railroad traffic operations will contribute to difficulties in the market.
22% of CK Supply’s business is related to CO2 and when dry ice is added to that, it equates to over 50% of the company’s business. An independent supplier of compressed gases, welding and cutting equipment, and dry ice that serves Missouri and Illinois, is also witnessing supply chain strains.
Continuing to expand on some of the earlier themes highlighted in the first of the day, Lane enthused the importance of knowing your supplier well. Looking at key points that should be considered when selecting a supplier, Lane said businesses need to consider feedstock sources, planned outages, supplier back-ups and any history on surcharges and allocations.
Adding to this, Lane then highlighted the importance of knowing your supply agreement. “The reason you need to challenge these things as a distributor, is because you need to be consistent to your customers,” he told attendees.
“Are your terms and conditions of your supply agreement consistent with your customer offering?” he asked the room.
Casting a brief eye over some of the topics that will be highlighted later today in Session 6, Safety and Performance, Lane said that due to the demand and importance of CO2 today, the company is now monitoring its assets more than ever – and others should follow suit.
These discussions, and many more, will continue here at the Chicago Marriott Downtown Magnificent Mile today. Make sure you keep up to date with the recaps that will be going live straight after the sessions on the gasworld website, and live coverage on our social channels.