Air Products $50M Indian Contract - Analyst Blog


Air Products & Chemicals Inc . ( APD ) announced that INOX Air Products Ltd., its joint venture in India, has signed a $50 million (INR 250 Crores) long-term contract with POSCO Maharashtra Steel Private Limited (PMSPL) to supply on-site nitrogen and hydrogen gases to its new facility located in Vile Bhagad, Maharashtra, Western India.

PMSPL is a subsidiary of POSCO and the site will be POSCO's second steel galvanizing project outside Korea. Further, it will be PMSPL's first investment for production in India. Galvanized steel is used in many outdoor, marine and industrial applications in order to prevent corrosion. The automobile industry is the primary target market for PMSPL in India. 

INOX Air Products will build and operate a high purity nitrogen plant and a steam methane reformer (SMR) hydrogen plant designed to meet the specific requirements of PMSPL's facility in Maharashtra. Both the nitrogen plant and the SMR are product offerings from Air Products' PRISM gas generation portfolio. The plants are all scheduled to come on stream between late 2012 and early 2013.

In December 2010, the company announced four new merchant gases facilities and a long-term on-site supply agreement for nitrogen and hydrogen with Saint Gobain Glass in Rajasthan, India. These projects included three ASUs and an SMR from Air Products' PRISM gas generation portfolio.

Air Products' PRISM line of gas generation systems supply nitrogen, oxygen and hydrogen to more than 1,500 customers in over 30 countries worldwide.  Global markets currently served by Air Products' entire PRISM line of gas generation systems include glass, steel, electronics and semiconductors, non-ferrous metals, metals processing, chemicals, food processing and packaging, and energy production and processing.

Based in Pennsylvania, Air Products benefits from a long-term take-or-pay contract, a consolidated industry structure, a diverse customer base and sustained pricing power. However, soaring energy and raw material costs pose a threat to margin expansion.

In order to compensate for escalating raw material costs, Air Products has been increasing the price for a range of chemicals it manufactures for industrial use. Air Products faces stiff competition from Praxair Inc. ( PX ) and The Linde Group.

We currently have a Zacks #3 Rank (short-term Hold recommendation) on the stock.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Stocks

Referenced Stocks: APD , PX

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