Industrial Gases Market to Reach USD1.93 Billion by 2018

Since the evolution of modern technologies in manufacturing, healthcare and other sectors, industrial gases have found extensive applications. From use of oxygen in cutting and welding technologies, to its use in assisted breathing in healthcare industry, industrial gases find widespread application that vary according to industry specific requirements. Industrial gases range from oxygen and nitrogen, which can be easily manufactured, to highly rare Xenon, which is difficult to extract. Industrial gases constitute different gases such as Oxygen, Nitrogen, Argon, Carbon Dioxide, Helium, Neon, Xenon, Krypton and others, however, Oxygen, Nitrogen and Argon are the most crucial gases. These three gases are used in engineering and fabrication industry, chemicals industry, healthcare industry, automobile industry, and allied sectors. (See Figure 1)

Manufacturing Process
Oxygen, Nitrogen and Argon constitute a major part of the atmospheric air. For extraction of these gases from air, two types of processes can be used – Cryogenic and Non-cryogenic. Cryogenic process uses an Atmospheric Separation Unit (ASU) for separation of atmospheric air into oxygen, nitrogen and argon. The atmospheric air is first cooled to cryogenic temperatures so that it liquefies and then selective distillation is performed in a distillation column (often referred to as ‘cold box’). The components are separated during distillation according to their boiling point. A key advantage of the process is its capacity to yield high purity gases, which are used across industries.

The other method of producing these gases is a non-cryogenic process, which uses Pressure Swing Adsorption (PSA) or Vapor Swing Adsorption (VSA). The process utilises an adsorbent to separate atmospheric air into individual components. However, it must be noted that using PSA/VSA technique only yields gaseous oxygen and nitrogen. Furthermore, the purity level is lower than that of a cryogenic ASU. Typically, oxygen is produced at a purity level of 93 per cent, while nitrogen with purity level of 95 to 99.5 per cent can be achieved using this process. Hence, portable oxygen and nitrogen generators are used for industries which require low purity grade as well as low consumption of these gases, such as portable nitrogen tyre inflators.

Applications
Industries such as manufacturing, engineering and fabrication, chemicals, pharmaceutical, healthcare, oil and gas, aerospace, food and beverages among others use these industrial gases. Oxygen, nitrogen and argon are extensively used across these sectors, wherein the application of a gas varies with chemical properties among different industries. For example, healthcare industry typically uses 95 per cent purity oxygen, while high purity oxygen is required for gas cutting application in engineering and fabrication industry, in order to achieve clean and high speed cut.

In chemical and petrochemical industry, oxygen is primarily used in oxidation process because it acts as the basic raw material in oxidation process. It is also used for manufacturing a wide range of chemicals such as ethylene oxide, propylene oxide, synthesis gas, ethylene dichloride, hydrogen peroxide, nitric acid, vinyl chloride and others. High amount of oxygen is required during coal gasification process, wherein oxygen is used for production of synthesis gas, which is used as a chemical feedstock. During catalytic cracking regenerators, it is used for enriching feed air in order to enhance combustion. In refineries and petrochemical plants, it is used in sulfur recovery units as well to regenerate catalyst in various processes.

Nitrogen is also an extensively used gas in chemical and petrochemical sector, wherein a key application exists in purging of tanks, pipelines and equipment in order to maintain an inert and protective environment. Nitrogen, being an inert gas, provides blanketing and inert atmosphere during production of chemicals. In view of its inert properties, nitrogen finds application in food and beverage industry during packaging so as to prevent oxidation of food products during shelf life. Liquid nitrogen is used for reactor cooling in pharmaceutical industry. Nitrogen in liquid form provides necessary refrigeration required in the industry.

Argon also finds applications in multiple industries. In metals and manufacturing, the gas is used to provide inert atmosphere during TIG (Tungsten Inert Gas) welding. Plasma arc welding also uses argon for providing inert atmosphere during welding. During manufacturing of steel, argon is used in the process known as argon-oxygen decarburisation. The gas is used in some heat treating processes as well.

Distribution Model
Industrial gases market is divided into two business models – Captive and Merchant market.

Within the captive business model, an on-site ASU is installed by industrial gas manufacturers on the consumer’s premises. This ASU caters to the demand throughout the manufacturing cycle of the consumer. Steel producing units often prefer captive industrial gas plants due to large and continuous requirement of oxygen during manufacturing process.

In merchant business model, the industrial gases manufacturer installs and operates an ASU, near a demand center as per locational studies conducted by individual manufacturer. The gases so manufactured are distributed in the merchant market following various distribution models.

The industrial gases distribution model follows three modes of supply from producer to consumers. The first mode represents bulk industrial gas users, which are catered directly by the producer. The producer ships the required gas from its facility to consumer’s site often using liquid trailers, which are unloaded at consumer’s storage tanks. Using this model, the consumer enjoys cost benefits by procuring in bulk volumes, for example, on an average, oxygen could cost as low as Rs 13 per cubic meter to bulk consumers. (See Figure 2)

The second model involves a distributor between the buyer and producer. The distributor sells industrial gases to consumers using gas cylinders (often 7 or 10 cubic meter cylinders). These distributors (often called re-fillers) procure liquid gases in bulk volumes from manufacturers and fill cylinders using a filling station.

The third model involves another distributor often located within the demand centers such as industrial areas or manufacturing clusters. These local distributors procure cylinders from re-fillers and distribute to end users. The price paid by the consumer in this model is high as compared to other distribution models. For example, average price of oxygen could be as high as INR23 per cubic meter.

Linde AG, Praxair, Inc, Inox Air Products Ltd, and Air Liquide are the leading players in India industrial gases market. As far as manufacturing capacity of industrial gases is concerned, Linde AG, Praxair, Inc and Inox Air Products are the leading players, in terms of manufacturing capacity in the country.

India – A Huge Market for Industrial Gases
“India industrial gases market is expected to grow at about 14 per cent CAGR through 2013-2018, reaching USD 1.93 billion by the end of 2018. Growth in industrial gases market in India is expected to be driven by increasing manufacturing base in the country.” said Karan Chechi, Research Director, TechSci Research, a research based global management consulting firm. (See Figure 3)

Following the government of India’s ‘Make in India’ campaign, a vibrant business ecosystem is anticipated to be created in the country to boost manufacturing sector. According to a recent study conducted by CII (Confederation of Indian Industry), the Figure 3 contribution to GDP by MSME (Micro, Medium & Small) sector is anticipated to increase from the current 8 to 15 per cent in 2020. Steel making accounts for one of the prominent markets for oxygen in the country. According to IBEF, India is expected to become one of the largest manufacturers of steel by the end of 2015. In 2013-14, crude steel production in the country stood at 81.69 Million Metric Tonnes (MMT), and is expected to reach 117 MMT in 2020, according to the forecast by TechSci Research. With increasing crude steel production, demand for oxygen is anticipated to increase as well.

With GOI’s ‘Make in India’ campaign, Indian economy is anticipated to experience uplift in manufacturing sector. With regard to industrial growth rate projections for the next five years, general manufacturing, which includes core manufacturing, engineering & fabrication is expected to represent highest compound annual growth rate (CAGR) of 16 per cent through 2015-20. Food industry is anticipated to follow with a CAGR of about 11 per cent, whereas chemical industry, not too far behind, is also anticipated to witness a CAGR of about 10 per cent during the same period.

Healthcare industry is growing rapidly in India. According to Indian Brand Equity Foundation (IBEF), healthcare industry is anticipated to reach USD 280 billion by 2020 from USD 79 billion in 2012 exhibiting a CAGR of 17 per cent in the intervening period. Hospitals, one of the key consumers of oxygen, constitute about 71 per cent of healthcare sector. Consequently, developments in this sector are expected to surge demand for oxygen over the next few years. (See Figure 4)

According to forecast published by International Monetary Fund (IMF) in 2014, India’s Real GDP is expected to reach USD 6.593 trillion by 2030. According to Moody’s, a US based financial services firm, India is expected to witness a growth rate of 7 per cent in 2016. With favorable government policies, such as allowing FDI (Foreign Direct Investment) in a number of industries, manufacturing sector in the country is anticipated to increase its contribution to GDP.

Trends & Developments Across the Globe
As per the latest trend, nitrogen has found a new application in Oil and Gas sector, wherein nitrogen is being used in hydraulic fracturing. With hydraulic fracturing, shale rock (which has low permeability and porosity as compared to sandstone) is perforated using perforation guns, in order to allow hydrocarbon to flow through the wellhead. Nitrogen based fracturing includes four types of processes – energised, foam, straight gas (mists) and cryogenic liquid. Energised nitrogen fracturing uses fracturing fluid with nitrogen concentration of below 53 per cent by volume. Foam based nitrogen fracturing utilizes nitrogen concentration ranging from 53 to 95 per cent, whereas above 95 per cent concentration is considered a mist. Cryogenic nitrogen fracturing is also used but to a limited extent, as special equipment is used for liquid nitrogen, which adds to the cost. With easing crude oil prices, nitrogen utilisation is anticipated to increase over the next few years.

Liquefied Natural Gas (LNG) demand in Asian countries has been rising over the past few years due to increasing natural gas demand in the region, which is anticipated to continue to increase during the next few years. Manufacturing industrial gases from LNG has been a key trend in the region, specifically in countries such as Japan, Korea and Taiwan. According to industry trends, using LNG’s cold energy for manufacturing industrial gases in cryogenic ASU significantly reduces cost of manufacturing. The cost is reduced as power consumption in an LNG integrated ASU is about 50 per cent less as compared to that of a standalone ASU. The first integrated LNG ASU in China was brought on stream in 2010. (See Figure 5)

Conclusion
With an improving economic outlook, demand for industrial gases in India is expected to increase over the next few years. Healthcare and manufacturing are likely to be the key sectors contributing to this demand. Increasing participation of foreign companies in Indian manufacturing sector is anticipated to bring technological advancements in the country. Emerging applications are also expected to evolve further with such developments, which is likely to contribute towards the demand of industrial gases in India.