Industrial Gases
Market, Supplier, Risk and
Competitive Intelligence

Industry Outlook & Drivers

Global Market Outlook On Industrial Gases

• The global industrial gas market is estimated to be around $85 billion in 2019, which is expected to grow at a CAGR of 2–3 percent until 2022
• The market could face a contraction in 2020, due to the COVID-19 outbreak and lower industrial demand

Global Industrial Gas Market: Drivers and Constraints

Drivers 

Rising Investments in Manufacturing and Processing Industries 

Surging private and public investments to unlock new avenues across several industries, including mining, and metallurgy, and others, especially in developing regions is likely to bode well for the industrial gas market. Various reports have reckoned that India, Malaysia, and Singapore are slated to become the leading economies in Asia thus offering worthwhile investment opportunities.

Rapid Growth of Food and Beverage Sector

Increasing spending in the food and beverage industry will push the demand for industrial gases. Europe leads the pack in terms of food production, with Germany securing the 4th position in the developed region. Such trends are likely to offer lucrative opportunities for industrial gas manufacturers.

Constraints

Strict Regulatory Framework for Manufacturing and Distribution of Gases

• Stringent laws and norms pertaining to the production, storage, and transportation of gases are expected to hamper the growth of the industrial gas industry over the predefined period. 
• The European Union (EU) has enacted regulations that specify the composition of hydrocarbons for the storage and distribution of industrial gases.

Industrial Gas Industry Analysis - Supplier Scenario

• Global industrial gas market is dominated by a few players with the top five players contributing around 80% of the industrial gas market share. Top players are looking to strengthen their market position through mergers and acquisitions.
• Linde and Praxair merger is likely to take place based on the current events. This will create the largest industrial gas player and change the industrial gas market share position in many of the regions.

Global Market Size - Industrial Gas 

• The industrial gas market is witnessing high growth, due to the revival of large economies, like China and the US. However, the profit margins have witnessed a rise due to lower operating cost arising out of cheaper energy prices
• The global industrial gas market is expected to grow at a CAGR of 5–7 % for 2022. The major drivers for growth would be emerging economies, including China and India
• The global industrial gas market was estimated to be approx. $76 billion in 2017, which is expected to grow at a CAGR of 7 to 8 % for 2022. The major drivers for growth would be emerging economies including China and India
• North America, North Pacific rim (China, Japan, etc.), and Western Europe are the biggest markets contributing more than 75 % of the global market
• Revival in economic activity and stabilizing oil and natural gas prices drive the industrial gas market growth

Global Demand by Application 

Healthcare Industry

• In the healthcare vertical, industrial gases are utilized for respiratory and numerous surgical and cryogenic applications. The fast-paced growth of the healthcare sector is likely to trigger high demand for industrial gases.
• Furthermore, the demand for carbon dioxide has been increasing from fire-fighting and medical applications. The need for a large number of COVID-29 care centers across the world, coupled with some medical use cases of carbon dioxide, is leading to a greater demand for medical-grade carbon dioxide.

Construction & Infrastructure Industry

• Countries in the Asia Pacific (APAC), such as India and China, are increasing their capital expenses for construction processes and large-scale infrastructure projects over the years ahead.
• Ongoing spending in mega infrastructure projects and key industrial sectors is projected to fuel demand for industrial gases. Several schemes such as pliable regulations, tax relaxations, easy access to resources, and low-cost land have been introduced by the governments in APAC to promote industrial penetration.

Key Trends

• The manufacturing sector is witnessing flat growth resulting in lower sales volume for larger players in America and Europe.
• The steel sector is going through a sluggish phase affecting the oxygen gas demand.
• Regulations for cleaner energy fuel and innovations in renewable space are driving the demand for hydrogen and on-site hydrogen markets.
• Increased use of digital devices and the growth of the semiconductor industry has made the electronics market a leading consumer of industrial & specialty gas.
• Healthcare needs and an aging population have driven the demand for pure and complex gases. Companies such as Air Liquide have invested heavily in medical-grade gas research.
• Food and beverage sector performed relatively better than the majority of the other industries in 2015 offsetting lower sales volume in South America among other regions.

Global Market by Delivery Mode 

• Onsite segment contributes to the largest delivery segment, serving large industries
• Praxair witnessed its merchant gas revenue share going back to the 2015 levels of 34 percent in 2017 from 35 percent in 2016
• Linde improved its share of onsite business in 2017 from 2016 with new plants coming online in Germany, Northern Europe, the Middle East and Eastern Europe
• Air Liquide supplies its bulk and cylinder gases around its onsite or pipeline businesses

Cost Structure

• High electricity requirement in separation of industrial gases makes it a primary cost factor and accounts for 50% of the overall production cost.
• Electricity cost accounts for around 50% of the cost of generation and hence the cost of production fluctuates with electricity prices. The weightage of cost factors could vary based on price change of individual parameters in each country.
• Recovery in crude oil price is likely to exert upward pressure on distribution cost. Electricity price is also expected to increase moderately, resulting in a surge in production cost.
• Large-scale operation provides lower production cost per unit of gas as compared to small independent ASUs for producing industrial gases separately.
• High capital costs associated with ASUs require large industrial consumers to opt for long term gas purchase contracts (3 years for bulk liquid and 15 years for tonnage).

Industrial Gas Price Drivers

Energy Cost

• Electricity is the main source of energy involved in the separation of air and thus drives the cost of production of industrial gases
• Large scale production has advantage over small units as smaller units have higher specific electricity consumption

Labor Cost

• Impact of labor is relatively low for industrial gas production and has very little effect on the overall cost of production of different grades of gases

Cost of Logistics

• Fluctuations in fuel prices have a direct impact on the overall logistics cost of transporting cylinders or bulk liquid trucking.
• Companies are optimizing routes and establishing filling centers to reduce costs associated with long-distance transportation of gases.

Oil & Natural Gas Price Fluctuation

• For gases like hydrogen and helium, feedstock cost fluctuations have large impact on production cost and hence companies are forward contracting to manage price risks
• It is directly linked to the raw material price hikes. It is also highly affected by indirect transportation cost

Quality/Special Gas

• If the composition of gas requirements is proprietary, the costs are generally very high. The requirement of high-quality gas also drives the cost. Low-quality gas and general gases carry lesser cost due to the abundant availability of multiple sources of supply.

Gas Purity

• Industrial gas companies price gases based on purity level and high purity gas requirements drive prices

Frequency of Purchase

• Non-frequent purchase of gases will drive prices and hence industrial gas customers are optimizing usage volume and frequency for consistent purchase of gases

Customized Products

• Complex design, specific gas products are tailor-made, which involves high value of production
• This drives the prices of such products as their availability is through select channels

Volume of Purchase

• Volume of purchase remains a key factor in determining prices as this can impact overall logistic costs and companies’ margins
• High volume of purchase suitable of FTL transportation can gather high discounts

Delivery Location

• Industrial gas companies price differently to different delivery locations based on their availability of infrastructure
• Delivery at locations where supplier has no presence would require new infrastructure which could drive prices

The report on the industrial gas market contains the quantitative and qualitative assessments of multiple factors such as the major industry drivers and restraints that will impact the revenue growth. In addition, the research study offers information about the regional industrial gas industries contributing to the global market growth. 

It consists of the competitive landscape that incorporates the leading and emerging market players and the strategies adopted by them including new product launches and collaborations. Moreover, the analysts at Beroe have leveraged various research methodologies such as Porter’s Five Forces analysis to pull out insights into the existing industry trends and developments that will drive the market revenue during the forecast time frame.

Methodology for Writing This Report

Beroe gathers intelligence through primary sources that include industry experts, researchers, and consultants, as well as current suppliers, producers and distributors. Secondary sources include business journals, newsletters, magazines, market research data, company sources, and industry associations. Following data collation, analysis, and strategic review, the Final Research Report is published on Beroe LiVE.