🌬️ A Hidden Oligopoly Powering Decades of Quiet Growth

I’ve recently taken a closer look at a lesser-known corner of the industrial economy and discovered a textbook example of a global oligopoly hiding in plain sight.

It's the industrial gas sector, which is dominated by just four companies that have delivered consistent growth and impressive returns for decades:

Air Liquide
Air Products and Chemicals
Linde
Taiyo Nippon Sanso

Together, these companies provide essential gases like oxygen, nitrogen, and hydrogen to a wide range of industries: including healthcare, semiconductors, chemicals and energy. They have a critical role in everything from semiconductor fabrication to the transition to clean energy.

Here's a quick summary of why the economics of this sector has created decades of strong growth:

The four businesses are embedded in the operations of their customers, creating a hard to disrupt switching cost.
Their operations are capital-intensive, which has created a physical barrier to entry and scale that a newcomer would find hard/impossible to replicate.
These barriers are made even higher by technical complexity, regulatory requirements and the need for dense distribution networks for the gas, which further prevents competition.
Long-term contracts with industrial clients (often 10 - 15 years in length) provide stable, inflation-linked cash flows.
Demand for industrial gas is both globally diverse.

The result of these factors coming together is a group of companies with unusually reliable earnings, strong returns on capital, and a track record of compounding quietly in the background.

Let's take a very quick look at each one.

Air Liquide

Air Liquide was incorporated in 1902 and is headquartered in Paris, France.