SIC 2813
INDUSTRIAL GASES



This industry classification contains establishments primarily involved in manufacturing industrial gases (organic as well as inorganic) that may be sold in compressed, liquid, or solid form. Industrial gases include acetylene, argon, carbon dioxide, helium, hydrogen, neon, nitrogen, nitrous oxide, and oxygen. Fluorocarbon gases are covered under SIC 2869: Industrial Organic Chemicals, Not Elsewhere Classified. Industrial gas distributors, including liquid oxygen shippers, are classified in SIC 5169: Chemicals and Allied Products, Not Elsewhere Classified.

NAICS Code(s)

325120 (Industrial Gas Manufacturing)

Industry Snapshot

In the United States, industrial gases touch virtually every facet of life. The three major atmospheric gases—oxygen, nitrogen, and argon—are used in steel production. Oxygen enhances kiln firing to reduce brick-making costs. Liquid oxygen and liquid hydrogen fuel rockets. Nitrogen is used in brewing beer, recycling tires, and applying metallic finishes on toys. Ammonia is synthesized from nitrogen for use in fertilizers, nitric acid, hydrazine, amines, and urea. It is also important in the production of nitrous oxide (also known as laughing gas) that is used as an anesthetic in some types of surgery. Liquid nitrogen and liquid carbon dioxide are used to make plastic fittings for moldings, enhance oil recovery from wells, and enable solvent recycling. Argon contributes to stainless steel manufacturing and serves as a component in fluorescent lighting.

The industrial gas industry differs from many other types of manufacturing because its raw materials are primarily extracted from the atmosphere. The two principal gases produced by the industry are nitrogen and oxygen. Dry air is composed of 78.1 percent nitrogen, 20.9 percent oxygen, and just under 1 percent argon. All other atmospheric gases, often called rare gases, make up the remaining one-tenth of 1 percent. Additional industrial gases such as hydrogen, acetylene, and carbon dioxide are obtained as co-products or by-products of other operations. Production costs within the industry are divided among labor, energy, and distribution.

The industry uses three different techniques to separate gases from the atmosphere. Cryogenic methods are the oldest and most widely used. Cryogenic separation relies on cooling and pressurizing the air until it becomes liquid. Oxygen, when held at a pressure of 80 pounds per square inch, liquefies at minus 274 degrees Fahrenheit; nitrogen liquefies at a colder temperature. As the atmospheric gases liquefy, they are extracted by means of a distillation process. Additional distillation steps are necessary to produce argon and other rare gases such as krypton and xenon. Helium liquefies only at temperatures approaching absolute zero. As a result, cryogenic production is not economically feasible for helium. Most commercially available helium is derived from natural gas rather than from the atmosphere.

Two non-cryogenic gas production methods are membrane separation and pressure swing absorption (PSA). Membrane separation uses hollow fibers, most frequently made of organic polymers, to recover gases such as hydrogen from oil refineries or carbon dioxide from natural gas supplies. Pressure swing absorption (PSA) relies on a molecular sieve material that selectively absorbs atmospheric components at specific temperatures and pressures.

According to the U.S. Census Bureau, the industrial gases industry shipped products valued at $5 billion in 2000. Although industry sales increased during the mid-1990s, shipments decreased in the late 1990s after peaking at $5.7 billion in 1998.

Organization and Structure

The industrial gas industry is divided into two major segments. The first, called the "tonnage" or "supply scheme" market, is composed of large-volume users who usually receive gas via a direct pipeline from an on-site production facility. Under typical on-site contracts, a gas supplier constructs a production plant at or adjacent to a gas user's facility. The gas supplier owns and operates the plant for the benefit of the gas customer. Long-term contracts dictate that the customer take a specified volume of gas, often the entire amount produced. Many contracts contain adjustment clauses to account for increasing energy prices, variances in productivity, or changes in labor costs. Within this market segment, gas sold is measured in terms of tons per day. Examples of customers who routinely purchase industrial gases on the tonnage market include chemical, petroleum, electronics, and steel manufacturers.

The other major market segment is known as the "merchant" or "bulk liquid" market. Customers within this market generally have fluctuating demand rates or operate multiple facilities in scattered locations. They often purchase gas products under short-term contracts of less than five years in duration. Suppliers deliver liquid gas in cryogenic tanker trucks or by rail. Gases are shipped and stored in liquid form because of volume constraints. For example, liquid oxygen takes up less than 1 percent of the space required to contain the same amount in a gaseous state. Examples of customers in this category include the metal, food processing, electronics, chemical, aerospace, plastics, medical, glass, and paper industries.

A third, but much smaller market segment, consists of cylinder gas deliveries. Cylinder gas shipments are generally limited to expensive specialty gases and mixtures. A typical tanker truck carries the equivalent of 1,600 large cylinders. A train of ten cars carries the equivalent of 57,000 cylinders.

Background and Development

The gases that make up the multi-billion-dollar industrial gas industry were discovered by various researchers living in several different countries beginning in the later half of the eighteenth century. Nitrogen was isolated in 1772 by Daniel Rutherford (1749-1819), a British physician; in 1776, it was identified as an elemental gas by the great French chemist Antoine-Laurent Lavoisier (1743-1794). Also about 1776, oxygen was discovered by two chemists working independently in Europe; the English scientist Joseph Priestley (1733-1804) and Swedish chemist Carl Wilhelm Scheele (1742-1786) share credit for the discovery. During the late 1800s, it was used for medical purposes and put to commercial use in welding. Oxygen was also used to generate limelight for theaters and music halls.

Acetylene was discovered in 1863 and first produced commercially in 1892. In 1897, Georges Claude (1870-1960), a French researcher, developed a method of dissolving acetylene in acetone at low pressures. Claude's process enabled the development of methods that allowed the movement of the gas via transportation cylinders. The first acetylene-burning torches were developed around 1900.

In 1877, two researchers, Louis-Paul Cailletet (1832-1913) in France and Raoul Pierre-Pictet (1846-1929) in Switzerland, developed similar processes for the fractional distillation of liquid air. This procedure made it possible to produce large volumes of oxygen economically. In 1903 the Linde Air Products Company constructed the first commercial oxygen plant in the United States.

Events of the early twentieth century demanded increasing amounts of industrial gases. World War I required large amounts of oxygen and acetylene for welding; during World War II pilots of high-altitude aircraft needed oxygen for their flights. Following the wars, researchers used inert gases such as argon and helium in electric arc welding.

Growing industrialization in the Western world brought rapid expansion to the gas industry. Oxygen demand continued growing through the 1950s as steel manufacturers turned to the gas to improve production methods. Maturing uses for nitrogen, previously considered a waste material, developed during the 1960s, along with advances in the uses of helium and argon. The 1970s brought large-scale expansions in the nation's capacity to produce industrial gases. The decade also saw growth in the use of specialty gases by the electronics industry. By the mid-1980s, the electronics industry used an estimated 15 percent of the nation's nitrogen output.

Current Conditions

Although demand for nitrogen in 1960 had been practically nonexistent, by the early 1990s nitrogen sales surpassed the sales of all other industrial gases. Nitrogen and oxygen sales combined accounted for approximately 41 percent of the industry's sales in the late 1990s. Carbon dioxide and acetylene ranked third and fourth.

Because nitrogen does not readily react with other materials, several industries use it as a "blanketing agent," which is a compound able to prevent unwanted reactions. For example, when nitrogen is used as a blanketing agent with embers, it prevents them from igniting. Nitrogen is therefore used to ensure product quality and improve plant safety. Oil producers use nitrogen to stimulate and pressurize wells. The gas is also valuable in steel processing, food production, cooling, refrigeration and freezing systems, solvent recovery, chemical and glass production, and in the electronics and aerospace industries.

Measured in terms of sales volume, the second most significant industrial gas in the late 1990s was oxygen, which is used to intensify or control combustion in a variety of industries. Its other uses include speeding fermentation, providing life support, and controlling odors. Chemical manufacturers, brick makers, and metal fabricators all rely on oxygen. Innovative uses include processes aimed at restoring or maintaining environmental integrity. Oxygen is used in hazardous-waste cleanup, waste-water treatment facilities, and coal gasification systems (a process designed to reduce the hazardous emissions associated with burning coal). One of the fastest growing areas of oxygen use in the late 1990s, however, was as a replacement for chlorine in bleaching, especially by pulp and paper manufacturers because the oxygen process pollutes less.

Demand for specialty gases such as krypton, xenon, and neon is also growing. Low-power lamps rely on krypton, high-intensity filament lamps and CAT scanners depend on xenon, and neon is necessary for lasers, display lighting, and bar-code scanners. All three rare gases were used to develop radial keratotomy, a form of laser surgery for eyes.

Industrial gas shipments fell from $5.7 billion in 1998 to $5.0 billion in 2000. The cost of materials increased from $2.0 billion to $2.2 billion over the same time period, and the total number of industry employees fell from 12,548 to 12,133.

Industry Leaders

In the mid-1980s Union Carbide was the largest industrial gas supplier in the United States. It provided approximately one-third of the nation's merchant gas. In 1985 the company opened six new nitrogen plants, with most of its production capacity aimed at the fast-growing high-tech market. In 1992 Union Carbide's industrial gas unit was spun off to become an independent entity, Praxair, Inc., which had revenues of $4.4 billion in 1996. In 1997, Praxair's president, Paul Bilek, cited economics, environmental regulations and issues, and globalization as the three forces affecting future growth of industrial gas manufacture.

Another major producer was Air Products and Chemicals, Inc. Founded in 1940, Air Products pioneered on-site industrial gas manufacturing. In 1991 the company introduced small volume, low cost, non-cryogenic nitrogen for use by metal heat-treating firms. In 1998 Air Products employed more than 16,700 workers, and its global sales exceeded $4.9 billion, of which almost half was derived from industrial gas sales. The firm's industrial gas segment was growing less rapidly than its chemical and related businesses.

Liquid Air Corporation, a subsidiary of the French company L'Air Liquide, entered the U.S. market in 1968. By the mid-1980s L'Air Liquide operated in 66 countries. Liquid Air is the company's headquarters for its operations in North and South America. It supplies products including oxygen, nitrous oxide, hydrogen, nitrogen, specialty gases, chemical gases, and rare gases to a wide variety of industrial users. Big Three Industries, another L'Air Liquide unit, sells most of its production to chemical and petroleum producers via a pipeline system located in the Gulf Coast region.

Another international gas producer with a strong presence in the U.S. market is the BOC Group., which derived more than half of its worldwide sales in 1996 from industrial gases. The BOC Group originated in England with the incorporation of the Brins Oxygen Company Limited in 1886. BOC acquired the American company Airco in 1978. By the mid-1980s Airco provided 20 percent of the U.S. domestic merchant gas. BOC's expansion continued; by the late 1990s, the company operated units on all continents except Antarctica.

Workforce

In the United States, the Census Bureau reported that the industrial gases industry employed a total of 12,133 workers with a payroll of more than $432 million in 2000. The three leading states by employment were New Jersey, Texas, and California. Production workers received an hourly wage of $21.91 on average in 1997.

America and the World

The global market for industrial gases experienced $29 billion in sales 1996 and is expected to reach $41 billion by 2003. Because of problems related to the transportation and storage of gas products, most production occurred close to its point of use. There was, therefore, very little international trade in industrial gases. Instead of transporting products, large international corporations functioned by operating production facilities in many countries.

The types and volumes of gases provided in an area depended on the development of the region's economy. Regions with emerging economies typically required high volumes of oxygen, whereas countries with economies based on high technology and service needed greater amounts of nitrogen. According to the BOC Group, the ratio of nitrogen sales to oxygen sales could be used as a measurement of a nation's industrial development.

Research and Technology

During the 1990s, pollution abatement was one of the most rapidly developing areas of study within the industrial gases industry. Waste water treatment has successfully been improved by oxygen injection, and oxygen is also used in hazardous waste incineration. Large quantities of oxygen and hydrogen are consumed in the production of directly reduced iron, which replaces scrap metal resources (expected to be exhausted by 2001) in producing steel for electric-arc furnaces. Recovery systems using nitrogen to condense and recapture solvents and chemical vapors helped manufacturers come into compliance with the Clean Air Act Amendments of 1990. An innovative technology based on carbon dioxide offered promise for reducing the environmental impact of solvent use within the paint and coatings industry. Additionally, carbon dioxide-based refrigeration systems were introduced to replace systems that relied on chlorofluorocarbons (CFCs).

Research into new or refined uses for industrial gases also continued. Liquid nitrogen was being considered as a possible aid in reducing problems associated with cracking in structural concrete. Xenon provided sun-like brightness to meet the special lighting needs of airports, stadiums, the motion picture industry, and copying machine manufacturers. Other rare gases were also being developed for use in diagnostic technologies and pharmaceutical applications.

Further Reading

Air Products and Chemicals, Inc. 1996 Annual Report. Allentown, PA, 1996.

Johnson, Dexter. "Industrial gas industry is driven by economic, environmental forces." Chemical Market Reporter. 22 September 1997.

U.S. Census Bureau. "Industrial Gas Manufacturing." 1997 Economic Census: Manufacturing Industry Series. October 1999.

——. 1992 Census of Manufactures. Washington: GPO, 1995.

——. 1995 Annual Survey of Manufactures. Washington: GPO, 1997.

——. "Industrial Gases." Current Industrial Reports. Washington: GPO, 1997.

——. "Statistics for Industries and Industry Groups: 2000." Annual Survey of Manufacturers. February 2002. Available from http://www.census.gov .



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