Air Products and Chemicals Inc. (APD) has won another contract from ArcelorMittal (MT), to supply gases including oxygen, nitrogen and argon to the world’s largest steel maker’s Gent, Belgium steel facility. The Gent steel mill is operated under ArcelorMittal’s Belgium Affiliate. Financial terms of the agreement were not disclosed.
Under the current agreement, Air Products will construct a third on-site air separation unit at the Gent site to support ArcelorMittal in meeting its industrial gases requirements. The air separation unit, which is expected to come on stream by 2012, will have a total production capacity of 2,000 tons per day.
Air Products has been supplying industrial gases to ArcelorMittal’s Gent facility for 40 years. ArcelorMittal’s Gent facility is an integrated flat carbon steel site in Europe with a steel output capacity of 5.2 million tones. The thin hot and/or cold reduced sheet and medium as well as heavy plate produced at the steel mill find application in car bodies, household appliances, metal furniture, sanitary goods, tubes and receptacles.
The upcoming air separation unit will replace Air Products’s existing separation unit in Terneuzen where the company plans to put up shutters. The other two Air Products air separation units at the Gent site will continue supplying ArcelorMittal with their current oxygen, nitrogen and argon requirements at their existing operations.
Air Products and Chemicals, an industrial gas producer, is benefiting from long-term take-or-pay contracts, a consolidated industry structure, a diverse customer base and sustained pricing power. We are encouraged by the new contract wins across the industrial gas space in recent months, reflecting a robust growth momentum across the emerging economies of Asia, where the company has a strong presence.
As the economic recovery sets in across North America and other global markets, we become increasingly optimistic about Air Products’ prospects. Given its leading position in the gases business, the company is well positioned to capitalize on the cyclical recovery in its core industrial end-markets.
It has sufficient capacity to meet the expected upturn in demand without incurring additional capital expenditures. Separately, Air Products’ aggressive cost cutting and productivity initiatives, combined with portfolio realignment efforts, have helped to mitigate fixed cost headwinds.
Currently, Air Products has a Zacks #3 Rank (short-term Hold rating) and a long-term (6+ months) Neutral recommendation.
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