Freedonia: Demand for Industrial Gases Poised for Healthy Increase

Shipments of industrial gases in the U.S. are forecast to increase 6.3% per year to $6 billion in the year 2003, outpacing the general economy. Although industrial gases are used to some extent in virtually all industrial production processes, the industry will remain heavily reliant on the chemical processing, petroleum refining, and metallurgy industries, which are projected to experience steady gains over the forecast period. The strongest gains are arising in the water treatment and electronics sectors, as well as niche segments such as medical diagnostic equipment and lasers. These and other trends are presented in Industrial Gases, a new study from The Freedonia Group Inc. (Cleveland).

Nitrogen and oxygen will continue to account for the majority of industrial gas shipments. Because these gases can be easily recovered via either cryogenic or noncryogenic air separation technologies, capital and production costs are minimal, and pricing structures are primarily dictated by transportation costs and purity requirements. The growing prominence of noncryogenic production methods, which can allow smaller volume customers to produce their own gas at the point of final demand, has greatly impacted the industry's established distribution strategies over the last decade, particularly within the merchant market for tanker sized quantities of liquid oxygen and nitrogen.

Hydrogen will post the industry's fastest gains, with shipments benefiting from stronger demand in refineries due to its use in the production of cleaner burning fuels and in the processing of imported heavier crude oil from countries such as Mexico and Venezuela. In particular, hydrogen is finding much greater use in petroleum refineries due to mandates of the Clean Air Act that require the hydrosulfurization of petroleum products in order to produce cleaner burning fuels. Demand for hydrogen may benefit from new uses, such as powering fuel cells, due to intensive research and development efforts resulting from the Hydrogen Future Act of 1996.

The lower volume atmospheric gases, such as argon and various specialty gases (principally neon, krypton, and xenon), support significantly higher prices due in part to their rarity, as well as the capital costs associated with the additional production equipment required for their recovery. The argon segment will benefit from stable demand in the large primary metals segment, as well as steady gains in electronics and lighting applications. Demand for specialty gases will also benefit from stable expansion in the lighting sector, along with growing use in the medical, metallurgical, and electronics industries for various advanced applications including anesthesia, lasers, and plasma or dry etching processes.

For more information: Corinne Gangloff, The Freedonia Group, Inc., 767 Beta Drive, Cleveland, Ohio 44143-2326. Tel: 440-684-9600. Fax: 440-646-0484. Email: pr@freedoniagroup.com.