Industrial gases: a business built on electricity, delivery distance and cylinder assets

One product, three companies

Very large users get an air separation unit or generator built beside their plant, connected by pipe and underwritten by a long contract; the supplier is effectively a project developer and asset owner. Medium users take bulk liquid delivered into a vacuum-insulated tank the supplier installed, and the relationship revolves around telemetry, route planning and refill scheduling. Small users buy cylinders, where the economics are dominated by cylinder ownership, handling and returns rather than by the gas itself. Serving all three from one operation means running a project business, a logistics business and a rental business simultaneously.

Electricity is the raw material

Air is free; compressing and cooling it is not. Separation plants are among the larger electricity consumers on most industrial grids, so the delivered cost of oxygen, nitrogen and argon tracks power tariffs and network charges more closely than anything else. Operators respond by siting plants where power is cheap and reliable, contracting supply carefully, and flexing production to periods of lower cost where storage allows. That flexibility has limits, since liquid storage is expensive and gas cannot be stockpiled indefinitely. Grid connection capacity, not equipment availability, is often the constraint on building new capacity.

Distance draws the market boundary

Delivered liquid loses value with every kilometre because product boils off in transit and haulage costs are real. Beyond a practical radius from the plant, a competitor with a closer facility wins regardless of production efficiency. The sector is therefore intensely regional even when the companies are multinational, and market share maps look like overlapping circles around plants. Investment decisions turn on whether a district holds enough anchor demand to justify a facility, since the first plant into an area gains a structural cost advantage that later entrants find difficult to overturn.

Contracts that finance plants

Nobody builds an on-site facility on a hope of demand. These projects rest on long agreements with minimum offtake, price indexation to power and inflation, and terms covering what happens if the customer's plant closes. Bulk customers sign shorter agreements with tank rental and minimum annual volumes. Packaged customers sign almost nothing, which is why cylinder pricing carries rental and handling charges that new buyers find surprising. Reading an industrial gas company means reading its contract book: heavily contracted volume is stable and financeable, while merchant liquid volume is where cycles are felt.

Cylinders, safety and the asset base nobody expects

A packaged gas business owns hundreds of thousands of pressure vessels scattered across customer sites. They require periodic statutory inspection, valve maintenance and traceable filling records, and they disappear steadily through customer attrition and scrap. Filling operations sit under stringent safety regimes covering pressure equipment and oxygen cleanliness, where a contaminated cylinder is a genuine hazard rather than a quality issue. Managing the fleet, tracking rental, chasing returns and controlling loss rates determines whether the packaged business earns anything, and it is where inexperienced entrants consistently misjudge the economics. Fleet size measured against revenue is the ratio that reveals whether that discipline exists.

Frequently asked questions

Why is gas from a nearby supplier cheaper even if their plant is less efficient?

Delivery cost and product loss in transit dominate the difference. Cryogenic liquid boils off on the road, trailers and drivers are expensive, and a longer route means fewer deliveries per vehicle each day. A supplier sitting close to your site can absorb a worse production cost and still land the product for less. That is why regional plant coverage, rather than headline plant efficiency, is what buyers should examine when comparing offers.

When does an on-site generator make more sense than delivered supply?

When consumption is large, steady and predictable enough to keep a unit loaded, and the purity requirement suits what on-site generation delivers. The trade is flexibility for cost: you gain a lower unit price and remove delivery risk, but you accept a long contract or your own capital, plus responsibility for a piece of equipment that must run. Sites with variable demand or seasonal shutdowns usually find delivered bulk supply cheaper over the whole term.

What do buyers most often miss in a cylinder gas contract?

The charges that are not for gas. Rental accrues on every cylinder held, whether or not it is being used, so idle vessels around a workshop quietly build cost. Handling, delivery and non-return fees add further. Buyers who audit their holdings, return empties promptly and match cylinder sizes to actual consumption often reduce spending without changing supplier or negotiating a single price line.