Supplier AIG to expand into industrial gas production
Industrial gas distributor AIG is seeking upwards of US$2 million to establish a gas manufacturing plant in Kingston’s industrial belt.
CEO Gordon Reid says his company has long been an industrial gases distributor for IGL, but with shortages of industrial gases such as carbon dioxide, oxygen, argon and helium, AIG sees an opportunity to grow its business.
There are no readily available estimates for industrial gases production and consumption in Jamaica, but anecdotal information puts the value of the industry at about US$40 million.
As to the market’s potential, Reid says gases needed for mission-critical inputs for hospitals and manufacturing entities could put the value of the industrial gases sector to about US$70 million. The US$30-million gap is the space in which AIG wants to play.
Reid said that while the establishment of the industrial gases plant will move AIG from distribution partner to direct competitor, his company is not interested in going head-to-head with IGL in supplying hospitals with medical oxygen. Rather, its focus is satisfying the needs of large industrial players. Companies such as Wisynco Group, which makes carbonated beverages, have had to import the CO2 needed to satisfy their clients in the face of shortages.
“We’re not doing the large hospitals and so on for now. Our goal is to go after the manufacturing base, the industrial base, mining and construction; all of those areas where they’re hungry for competition, surety of supply, better pricing and better service than they’re getting under the current monopoly,” Reid said in an interview with the F inancial Gleaner.
AIG is a new company that was set up by two brothers to take advantage of perceived market opportunities from the shortage of industrial gases that arose during the COVID-19 pandemic. The idea emanated from Reid’s brother, Donald Reid, who is in charge of the decades-old family business, Reid’s Gases, which is also involved in hardware and construction.
“My brother asked me to come back from my work in Silicon Valley to look at company strategy, and so on, and he floated the idea that we should form a company to import gases in light of the shortages, so that we could protect our existing business which was being crippled by the lack of supply,” Gordon Reid said.
The brothers incorporated AIG Industrial Gases Limited in September 2021. Gordon is the majority shareholder, Companies Office of Jamaica records show.
Reid says 90 per cent of his industrial gas supplies comes from IGL, with the rest being imported. He says that at critical times, despite a good relationship with IGL, his company has had to navigate long lead times for deliveries, inadequate supply to satisfy clients, which often triggers a reliance on imports.
“That’s the pain point for us. The business model is working but not working well enough,” Reid says of critical shortages of key industrial gases such as argon and acetylene for welding, along with oxygen and carbon dioxide for hospitals and the food industry.
AIG operates from Palmer’s Cross in Clarendon but plans to set up its own plant in Kingston’s industrial belt. The specific location was not disclosed. The US$2 million being raised will be enough to establish a tank farm and install necessary equipment to produce the gases needed to satisfy market demand, he said.
The unidentified location, according to Reid, would double as a more appropriate distribution hub, since it will be closer to the target customers.
“All the manufacturing entities are there; if we do that operation from Clarendon then transportation would crush us,” Reid said.
He is targeting January 2024 for the expansion.
The company will be importing gases in specialised tanks that carry the industrial gases in gaseous form. The investment will facilitate the manufacture and distribution of the gases in liquid form using cryogenic technology.
The company presently employs eight persons, several of whom are former IGL workers. Also part of the management team is gas industry expert Gregory Beck, formerly of Wilson Beck, an LPG company which was recently sold to petroleum marketing company Fesco.
Reid says AIG will be establishing a plant that has a production capacity of just under 10 tonnes per day, producing nitrogen, oxygen and other gases cryogenically.