Industrial Gas Market Size & Share, by Type (Oxygen, Nitrogen, Hydrogen, Carbon Dioxide, Argon, Helium); Application; and Distribution Mode - SWOT Analysis, Competitive Strategic Insights, Regional Trends 2025-2034

Industrial Gas Market - Growth Drivers and Challenges

Growth Drivers

• Cost efficiency of oxygen furnaces: Steel and iron are obtained from basic oxygen furnace (BOF), blast furnace (BF), and electric arc furnace (EAF). The BF-BOF method plays a critical role, accounting for approximately 70% of the steel produced. According to an EPA 2023 report, steel mills have been the largest single end user of purified oxygen, and contribute to 65% of U.S. consumption. Chemical manufacturing and other industrial combustion use cases, including glassmaking and ceramics, welding, and pulp and paper, are well-known industrial oxygen applications.

WITS Worldwide Export and Import of Oxygen in 2021

Source: EPA

In 2023, the NCBI examined the process-emission intensities and economic burden of basic oxygen furnaces. The data is derived from several sources and stakeholder discussions, from a European viewpoint, in terms of energy cost and resources. The most important aspect is the operational expenditures or OPEX for electric arc furnace steel/direct reduction iron, which is 50% more expensive than its basic oxygen counterparts. Consequently, electricity cost comprises the electricity consumed for steel production and hydrogen generation. Moreover, direct reduction iron/electric arc furnace requires iron ore as a raw material, unlike basic oxygen furnaces. This further adds up to the operational expenses of the former.

Cost analysis of different iron and steel production routes (net of taxes)

Source: PMC

• Emerging use of hydrogen as an energy source and supportive tax rebates:  Hydrogen is a widely used industrial gas by refineries to decrease the sulfur content in diesel fuel. The Inflation Reduction Act of 2022 includes two major tax credit programs. The base tax credit amount is roughly $0.60/kg (typically adjusted for inflation), as mentioned in the 2023 National Governors Association publication, and the applicable percentage can range from 20-100% considering lifecycle GHG emissions.  It is also extended to the Credit for Carbon Oxide Sequestration, whereas a surplus bonus credit of 5x the base amount is likely to be available in the future. The novel credit program called the U.S. Clean Hydrogen Production Tax Credit is open to all hydrogen manufacturers in the country. This is projected to positively influence the blue hydrogen production.

Hydrogen Tax Credit Programs in the Inflation Reduction Act

Source: NGA

In terms of federal financial aid, the Infrastructure Investment and Jobs Act of 2021 allocated USD 9.5 billion to foster the development of hydrogen infrastructure for numerous industrial applications. The Regional Clean Hydrogen Hubs is the largest program that aims to boost new producer networks to promote hydrogen as a clean carrier.

Hydrogen Funding Programs in the Infrastructure Investment and Jobs Act

Source: NGA

Clean Hydrogen Strategy Roadmap

The clean hydrogen strategy goals are achieving net-zero GHG emissions by 2050 and 100% carbon-free electricity by 2035. It creates pathways for the country to fulfill its 2030 Nationally Determined Contribution. This ambition is attainable aggressive action, a robust technology portfolio, and adoption in industrial use cases.

U.S. National Clean Hydrogen Strategy and Roadmap, through 2050

Source: U.S. DOE

In transportation, the cost of hydrogen for biofuels varies depending on the variability in demand and availability of feedstock, assuming approximately 6 MMT H2 annually. For industrial use cases, high-end applications are methanol production and steelmaking, while the low end of the range is used to generate ammonia- another popular industrial gas.  Clean hydrogen is also used for petroleum refining at the same rate (~6 MMT/year) as that steam methane reforming (SMR). The anticipatory demand in 2050 in industrial end users, blending, power-to-liquid fuels, grid balancing, and energy storage is depicted below.

Source: U.S. DOE

The following graph shows the expected industrial hydrogen demand (produced, dispensed, and delivered) as identified by the U.S. DOE.  Roughly USD 5/kg for hydrogen is likely to pave the way for early adopters in the industrial gas market for fuel cells. At about USD4/kg, scenario analyses, 10-14% of all heavy and medium-duty fuel cell trucks are projected at 5-8 MMT annually. The research is yet to be refined owing to the uncertainties in fuel cell price, durability, efficiency, on-board storage, and incumbent fuel costs. However, these statistics are based on high demand for clean hydrogen and are derived based on the assumption that the DOE targets will be met in the future. IRA tax credits are set to support FCEV deployment in the forthcoming years, and the EPA will continue administering IRA programs.

Source: U.S. DOE

Challenges

• High environmental safety and compliance costs: Industrial gas manufacturers face entry barriers as a result of strict environmental regulations by the EPA and ECHA. The EPA’s 2023 Toxic Substances Control Act led to a spike in compliance for U.S. manufacturers. Cost volatility in raw materials is straining the key players. Trade restrictions and tariffs have further restrained industrial gas market entry, and suppliers like BASF encountered a two-quarter delay in entering the Indian industrial gas market. Exorbitant safety compliance prices in the U.S. have stifled smaller companies and prevented unable from competing with giants such as Dow and others.

• High capital and operational costs: One of the primary restraints in the industrial gas market is the significant capital expenditure (CAPEX) and operational costs associated with production, storage, and distribution. Establishing air separation units (ASUs), cryogenic storage facilities, and pipeline networks requires massive upfront investments, limiting industrial gas market entry for smaller players. Additionally, maintaining these facilities involves high energy consumption, particularly in gas liquefaction and purification processes, driving up operational expenses. Transportation costs further add to the financial burden, especially for specialty gases that require pressurized or cryogenic containers. Industries in developing regions often struggle with these costs, leading to lower adoption rates compared to mature markets. While economies of scale benefit large producers like Linde and Air Liquide, the high cost structure remains a barrier for broader market expansion, particularly in price-sensitive sectors such as small-scale manufacturing and healthcare.