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TBRC: industrial gas use on the up

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Hydrocarbon Engineering,

The market for industrial gases, or differently known as bulk gases or commodity gases, is expected to increase pace in the growth period from 2017 to 2021 reaching US$87.46 billion following 4.4% yearly growth, a report from The Business Research Company (TBRC) shows.

In the historic period from 2013 to 2017, the market for commodity gases had been growing at 2.7% growth rate. The major aspects which did not let the market grow were safety concerns and continuous change in regulations as all natural gases are potentially hazardous. As the time passed, a new use of industrial gases was introduced, which helped accelerate the growth of the market. The use of commodity gases in the healthcare industry has increased drastically. In addition to oxygen, nitrous oxide and nitric oxide, other industrial gases like hydrogen, helium, and xenon are all prepared for a clinical use in pharmaceutical-based products. Treatments and drug developments using induced pluripotent stem cells (IPS) are bringing a new added value to the industry through the application of systems using gases such as carbon dioxide and liquid nitrogen, which are indispensable for the cultivation and preservation of cells and tissues driving demand for high-grade industrial gases.

Another industry in which use of industrial gases has increased in the recent past is the food and beverages industry. This industry is increasingly utilising food-grade industrial gas. Food grade gases are high purity gases complying with food grade standards. These industrial gases include nitrogen, oxygen, and carbon dioxide, which are used to chill, freeze and package a variety of food products. Since health-conscious consumers are demanding fewer additives, safer and fresher food products than before, it increases the demand for industrial gases, which can sometimes substitute chemical ingredients.

Industrial gases are produced in large quantities by companies for use in industrial manufacturing processes. The industrial gas industry comprises establishments primarily engaged in manufacturing industrial organic and inorganic gases in compressed, liquid and solid forms.

The study of natural gases is usually split by segment and by end-user industry. In 2017, nitrogen was the largest segment in the global industrial gas market with a 28% share of the market, worth US$21 billion. The segmentation ratio of the market is not expected to change by 2021 since all segments of the industrial gas market (nitrogen, oxygen, carbon dioxide, hydrogen and other gases) are forecast to have similar growth rates. Nitrogen in 2017 had the largest share due to presence of established pharmaceutical, food processing and general manufacturing industries that widely use nitrogen in their manufacturing processes. In terms of end-user industry, manufacturing was the leading one with a 27% share of the market, worth close to US$20 billion. This was mainly due to the high demand for industrial gases such as nitrogen and hydrogen.

The largest market for industrial gases in 2017 was the Asia Pacific region. The market was worth about US$26 billion hosting a bit more than one-third of the market. The high share of Asia Pacific region in the global market is mainly due to a high number of electronics manufacturing companies, which are headquartered in this region in countries such as China, Japan, Singapore, Malaysia, and Thailand. North America’s industrial gas market was the second largest in the world with 31% share of the market.

The mergers and acquisitions (M&A) activities in the industrial gases market are expected to increase in the coming years, based on a strong year of activity in 2016 - 2018 when companies such as Air Liquide and Praxair acquired other companies at high values or strategically merged with other companies. For instance, in April 2018, MagneGas Corp., a leading clean technology company in the renewable resources and environmental solutions industries, completed an acquisition of Trico Welding Supply, a leading independent industrial gas and welding supply distributor in the Sacramento market in California, US. In June 2017, Praxair and Linde signed a definitive business combination agreement to come together under a new holding company through an all-stock merger of equals transaction. In March 2017, Cenovus Energy Inc. acquired oil and gas assets of ConocoPhillips. In January 2017, Oneok Inc. acquired the remaining public stake in Oneok Partners L.P. for US$17.2 billion. In May 2016, Air Liquide acquired Air Gas for US$10.3 billion. Industrial gas companies are continuing to realign portfolios and pursue profitable inorganic growth opportunities. In addition, M&A interest is likely to be fuelled by stronger corporate balance sheets, liquid debt markets, and continued favourable interest rates.

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