The higher cost of cylinders and tanks since 2020 and the disruption of the pandemic has changed the market in North America, with prices still much higher in real terms today than pre-pandemic.
For distributors, it is a shift that means that keeping cylinders and tanks looking good as well as functional is even more important, given the cost of replacement.
“And it is a development that is impacting the market [and our customers] in some respects,” said John Norton of Select Gases in Atlanta.
“In recent times there has been growing interest in investing in microbulk tanks in many industries, because of the advantages that the extra volume offers compared with cylinder supply. But now the rising cost of these kinds of investments has made them less attractive. The set-up costs today mean that many smaller companies are opting very often for 12- or 16-packs of cylinders rather than microbulk.”
Norton noted how he received a quote for a 2000-litre microbulk tank that was prohibitively costly for the customer compared with five years ago, and with a longer lead-time to supply as well.
“In the circumstances, it is easier for some companies to treat their industrial gas purchases as an operational expense rather than opting for a capital outlay that won’t deliver a return on investment for many years.”
Why have prices risen so steeply? It comes down to the cost of stainless steel and other sourcing costs, plus other inflationary pressures.
“The market was set back in a big way during the pandemic. I suppose I half-expected that pricing would have returned broadly to where it was before 2021 by now – but it just hasn’t happened.”
That’s not to say that the microbulk market is dead in the water – just that the maths when assessing the viability of the investment is different today in North America, so fewer projects are likely to stack up and move ahead. The pipeline is still being fed, but more slowly than if pricing was more attractive.
“When it comes to bulk and microbulk, investment is still up,” said Bryan Keen of Keen Compressed Gas Co in Delaware.
“You still need to invest, and many are, but the costs involved mean it is not for the faint of heart. The waverers aren’t going ahead, but there remain those out there that are willing to commit.”
Keen added: “We have been in microbulk for 25 years. We have a bulk and microbulk specialist who spends all his time on these accounts – and we have a pipeline of prospects. The growth we do see is in a variety of areas, from commercial labs to universities to welding applications, and also in food and beverage.”
