Industrial gas market in Vietnam growing stably

Manufacturers from Japan, South Korea, China, Taiwan, Malaysia and Singapore are actively advancing into Vietnam, and production is strong for state-run businesses in iron and steel, petroleum, fertiliser and other areas. The demand structure in Vietnam, as is characteristic of development countries, relies heavily on oxygen.

However, there is an apparent and sudden rise of new fields, including all types of electronic components, as well as household appliances, pharmaceuticals, food products, general contracting and services. MRIs for hospitals are also starting to become popular. This has resulted in diversification of gases to include nitrogen, argon, carbon dioxide and helium.

Furthermore, manufacturing is developing more depth accompanied by an increase in the number of medium-size plants. This provides a wider range in the gas, welding material and related equipment markets.

This article focuses on the activities of four Japanese gas companies that have ventured into Vietnam: Vietnam Japan Gas (VJG), a joint venture between Taiyo Nippon Sanso and Tomoe Shokai, Air Water Vietnam, Iwatani Vietnam and Tomoe Vietnam.

VJG and Messer fight for top share

In November (2018), the Vietnamese government set a GDP growth rate of 6.6% to 6.8% as its 2019 economic target. The government announced GDP growth rate for January through September 2018 at 7% against the same period a year ago. Although there are concerns with rising wages and increasing inflation, the economy should continue favourably for the time being.

The driving force behind the economic growth is foreign capital. The top country to venture into Vietnam is South Korea, with an overwhelming 4,000 companies, followed by Japan, with around 1,900 companies.

South Korean Samsung Electronics has factories in Bac Ninh and Thai Nguyen Provinces and sees them as core production facilities for Southeast Asia. The advancement of foreign companies causes wage rises in the local areas.

Japanese companies are also making large capital investments, including Nghi Son Refinery and Petrochemical (NSRP, Thanh Hoa Province, a joint venture by Idemitsu Kosan, Kuwait Petroleum International, Vietnam Oil and Gas Group and Mitsui Chemicals), Terumo (Hanoi, Dong Nai Province), Nippon Zoki Pharmaceutical (Bac Ninh Province), and others.

Infrastructure investments include construction plans for expressways, the North-Soith express railway, and the Ho Chi Minh City subway, but completion schedules for these have been greatly delayed. It is unlikely the Vietnamese government will force schedules forward, and this is a factor in the trend towards delays and interruptions in all sorts of plans.

When The Gas Review asked companies about the difficulties of doing industrial gas business in Vietnam, they all gave similar answers:

• “Interpretations of laws and regulations related to gas safety vary according to the official and time.”
• “High-pressure gas containers are not colour-coded according to the type of gas.”
• “There is not much of a concept of plant maintenance.”

The same applies to approvals and certification. It was also said that “vehicles carrying high-pressure gas cannot go through cities like Hanoi and Ho Chi Minh”. Problems with traffic congestion and widespread bribing are not restricted to the gas industry.

In spite of that, Vietnam still has a lot of appeal for gases and equipment due to the steady market expansion produced by stable economic growth.

In addition to the four gas companies listed above, Eto Oxygen has also ventured into Vietnam, as have non-Japanese companies Messer, Air Liquide, Linde and others. Currently, VJG and Messer are fighting for the top share.

Gas demand is stable for piped supply of gases to the iron and steel, electric furnace and chemical industries. The main users include: Hoa Phat, Pomina, TISCO, POSCO and Vina Kyoei Steel, Nghi Son, ASP, LSP, and Long Son.

Hoa Phat is installing a new blast furnace in Central Vietnam, and ASP is planning expansions of its production.

There is instability in demand for argon and carbon dioxide. Dependency in China is high for argon. This trend is strong in the north, but recent strengthening of environmental regulations has led to lower production in China’s blast furnaces over the winter, affecting the production of argon.

For carbon dioxide, the source is fertiliser manufacturers. Off-gas is collected, but a lot of fertiliser is imported and when fertiliser market prices soften, production is halted.

The petrochemical business is not yet set up very well in Vietnam, so there is very little by-product carbon dioxide gas available. Sources of hydrogen are also scare.