It is hard to start any article regarding business in 2020 without mentioning the impact the management of the pandemic and the subsequent effect on the economy and markets. Like other parts of the industrial gas business, the US distributor type business (DTB) that includes packaged gases and hardgoods has been hurt in some markets more than others by businesses closing or scaling back to manage the spread of Covid-19. More resilient markets included healthcare, electronics and food processing while the greatest negative impact was on manufacturing and metals. This is consistent with US economic data.
US DTB gases is a major component of the US industrial gas business. The packaged gas business is the largest component of the DTB business. Total US gas revenues in 2019 were $26+ billion (bn) of which $9.1bn were derived from DTB gas sales. Of which $8.2bn, or 32% of US gas revenues, were derived from packaged gas sales. The impact of the pandemic on these revenues for 2020 has yet to be fully understood, but revenues results to date indicate a drop in revenues for the year anywhere from mid-single digits to 10% depending on the markets served by a business and their ratio of packaged gases to hardgoods. A few independents noted modest gains. Overall demand showed modest signs of stability by the end of the third quarter. A return to pre-Covid revenues is not expected until late 2021.
The US industrial gas (IG) business has a unique multi-tiered supply channel made up of producers, distributors, and customers/markets. Gas producers are large, publicly held companies with national market penetration and account for 60% of DTB revenues. They supply gases directly to both distributors and to customers in all markets, via three modes based on volume requirements: on-site and pipeline (OSP); bulk and microbulk; and packaged. Independent US distributors buy gas from producers and deal mostly in high pressure and liquid cylinder gases, micro/small bulk, and increasingly, in regular bulk modes. Distributors serve regional markets and also carry hardgoods which can be a significant component of their business. However, the rapid onset of e-commerce into the hardgoods business supply chain is causing distributors to increase their packaged gas portfolio and reduce the hardgoods business .
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