Market For Stainless Products in LNG

The liquefied natural gas (LNG) market for stainless products is USD $80 billion per year and growing rapidly. But the question for the manufacturers of both stainless products and stainless steel is whether LNG is one of the most profitable opportunities to pursue.

By Robert McIlvaine, President & CEO – The McIlvaine Company

Introduction

The answer is found in precision mapping using the following path:

• A telescopic overview of the main segments: liquefaction, transport, and regasification;
• Analysis of the USD $100 million subsegments; and
• Finding each USD $1 million per year opportunity with 30% earnings before interest, taxes, depreciation, and amortization (EBITDA) and 40% market share.

These favorable opportunities are created by product, technology, customer, and location synergies. The synergies can be depicted as moons orbiting in a synchronized manner to maximize EBITDA. The highly profitable lunar landings are found only with precision mapping.

LNG Market

Oil and gas can be viewed as a USD $300 billion dollar galaxy in the USD $2.5 trillion air, water, and energy universe.

Natural gas is growing at 3% per year. What is most impressive is that the percentage of gas converted to LNG is predicted to increase by 6% per year through 2040. The primary reason for the high level of growth is the ability to economically move natural gas from source to use. This economy is due to liquefaction and the fact that the process reduces the gas to 1/600th of its original unliquified volume and to half the weight of water.

Russia and the Middle East countries have been the leading gas producers in the past, but horizontal drilling and hydraulic fracturing have created large new sources of gas.

According to the International Energy Agency (IEA), in 2024, global gas demand is forecast to grow by 2.5%, or 100 billion cubic meters (bcm). Price-sensitive industrial sectors will see a return to growth. Power generation is forecast to increase only marginally, as higher gas burn in the Asia Pacific region, North America, and the Middle East is forecast to be partly offset by reduced demand in Europe.

While growth in natural gas use will be modest, the percentage that is converted to LNG will grow by 6% per year through 2040.

The U.S. has leveraged hydraulic fracturing to become the world’s largest gas producer. It has invested in liquefaction terminals and exports LNG around the world.

As of October 2023, U.S. terminals for LNG exports had a combined capacity of 92.9 million metric tons per year.

North America’s LNG export capacity will expand to 24.3 billion cubic feet per day (Bcf/d) from the current 11.4 Bcf/d as Mexico and Canada place their first LNG export terminals into service and the U.S. adds to its existing LNG capacity. By the end of 2027, LNG export capacity will grow by 1.1 Bcf/d in Mexico, 2.1 Bcf/d in Canada, and 9.7 Bcf/d in the United States from a total of 10 new projects across the three countries.

Five LNG export projects (Golden Pass, Plaquemines, Corpus Christi Stage III, Rio Grande, and Port Arthur) are currently under construction in the U.S. with a combined 9.7 Bcf/d of LNG export capacity. Developers expect LNG exports from Golden Pass LNG and Plaquemines LNG to start in 2024.

Exxon Mobil and other major oil and gas companies have invested in large tankers that have doubled the capacity of the earlier models.

In addition to ship and rail, virtual pipelines are experiencing strong growth. Gas, which was formerly flared due to lack of a pipeline, is now liquefied and moved by tanker trucks to power generators and other users. Recipient countries in Europe and Asia have invested in regasification facilities.

Stainless Product Opportunities

LNG requires a number of challenging processes where stainless is the material of choice.

Natural gas as extracted contains a lot of acid gases and other gases, solids, and liquids that need to be removed. The acceptable remaining quantities of contaminants are far lower than if the gas is not compressed.

The purification, compression, and refrigeration processes require materials to meet the corrosion, temperature, and pressure requirements.

Products include compressors, pumps, valves, tanks, piping, heat exchanges, scrubbers, and separators.

The LNG valve star market is close to USD $1 billion per year and consists of 10 planets with a total of 100 moons. The definition of these moons is flexible and depends on the million dollar per year lunar landings.

The question is how to coordinate lunar landings for 30% EBITDA and 40% market share.

Products: It can include a combination of products. Valve manufacturers now also offer cryogenic piping (Crane), pumps (Flowserve), and compressors (Atlas Copco, Ingersoll Rand).

Technology: There is a growing market for carbon capture. Liquefaction of CO₂ LNG is the front end of the chain, while CO₂ capture and sequestration are the end of the chain.

Locations: Valve companies active in Qatar can synchronize LNG with other opportunities. Customers: Synchronization can be segmented into the three main LNG activities. Exxon Mobil and other large oil and gas companies are involved in the complete supply chain but may not be involved in the valve decisions for a new tanker.

Most Profitable Stainless Products for the Supplier

The most important synergy is among:

1) product type

2) size

3) service, general, unique (severe and critical)

4) media: liquids, gases, vapors

Summary

The LNG market for stainless products is large and growing. Many of the applications are challenging and require special features. This creates opportunities for 40% market share and 30% EBITDA.

Each million-dollar-per-year opportunity should be ranked and grouped in sets of lunar landings creating opportunities of USD $10 million dollars per year or more. These increments are large enough to justify product and regional manager activity.

Value propositions for each set should not only be the basis of the rankings but the guide for achieving the desired results.