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A Complete Guide To Start A Business In Industrial Gas Market

Gaseous materials that are specifically manufactured for use by industries are known as industrial gases. Although gases have been used by humans since ancient civilizations for various purposes, the main gases used as industrial gases in modern times are oxygen, nitrogen, carbon dioxide, hydrogen, argon, acetylene, and helium. Apart from using the gases in pure forms, there are numerous variations of gas mixtures that are also used by industries.

Industrial gas suppliers vary in size in the industry, depending on the volume of supply with larger suppliers catering to large-scale industrial enterprises and smaller suppliers providing industrial gases in cylinder form to tradesmen, wholesalers, and even the public and retailers. Industrial gases for medical purposes, welding, LPG, beer kegs and helium for balloons are examples of small scale suppliers, while large-scale suppliers include those supplying oil-refineries and chemicals industry and mining.

Guide To Start A Business In Industrial Gas Market

When starting a business in the industrial gas market, it is essential to understand the market trends, market competition and identify a suitable business plan. Based on the current global industrial gas market share, the global market for industrial gases is projected to reach a value of $110 billion by 2022, growing at a CAGR (compound annual growth rate) of 7-8 percent.

  • Establishing a business in the industrial gas market is a profitable venture, with considerable profit margins, and significant growth of the industrial gas market overall. Profit margins have increased due to lower operating costs and cheaper energy prices since the cost of manufacturing industrial gases depends on 60 percent on electricity costs. A lot of electricity is required during the separation of industrial gases. The prices of industrial gases are based on the gas purity, how customized the product is, purchase volume and location of delivery. Production on a large scale tends to yield a lower per-unit cost of production as compared to smaller production units.
  • In the industrial gas market, the high market maturity regions are the U.S., Canada, and Australia, while medium market maturity regions are Brazil and South Africa. The regions of North America, Western Europe and countries in the North Pacific Rim region such as China and Japan are the largest consumer regions, accounting for over 75 percent of the global market share. The top 5 players currently in the industrial gas supplier market account for nearly 80 percent of the overall global market share and seek mergers and acquisitions to further expand their reach. Top global service providers are Air Liquide, Praxair, Air Product, Linde, TNSC, and Yingde Gas. The significant growth projected for the industrial gas industry is driven by the revival of major world economies such as the U.S. and growth of emerging economies such as China and India.
  • It is important to identify the end-user segment to cater to, based on market competition, potential clients and growth of the end-user segment industry overall. Industrial gas plants can be broadly classified on the basis of the gas that is produced, for example, nitrogen gas plant oxygen plants, carbon monoxide plants, acetylene plants, cryogenic gas plants, LNG plants, biogas plants, and CNG plants.
  • Key end-user segments for the industrial gas market are healthcare, electronics, steel, chemicals, oil and gas, mining, and food & beverage. Although the demands for industrial gases from the oil & gas and steel industries have witnessed sluggish growth, there is considerable demand from healthcare and electronics. The electronics market is a leading consumer of industrial and specialty gas while healthcare has great demand for pure and complex gases. With governments across the world discouraging the use of non-renewable sources of energy, the demand for industrial gases that can be used as fuel is expected to rise as well.
  • The most popular delivery models are on-site/pipeline, bulk/merchant and cylinder/packaged, with large industries preferring on-site delivery mode. The average contract period depends based on the delivery mode of the industrial gas, with cylinders having a contact period of less than 1 year, bulk gases a contract period of 3-5 years and tonnage delivery having 15 or more years. Most common industrial gases that are in gaseous form at ambient temperatures are transported by compressing them into pressure valves, while others such as ammonia are transported directly in liquid form.

The industrial gas market has steady growth predicted in the coming years with a significant profit margin making it a viable business option for entrepreneurs. Although the market is largely consolidated with major suppliers, there is plenty of opportunity for smaller suppliers directed at targeted industries such as healthcare and electronics that are expecting steady growth in the coming years. Apart from the established uses of pure industrial gases, there are many added applications of the various gas mixtures, presenting even more opportunities for new businesses.