Air Products Forays into China

Industrial gases and specialty chemical company, Air Products and Chemicals Inc. (APD - Snapshot Report) has forayed into the Chinese liquefied natural gas market (LNG) by signing an agreement with Technip to supply Air Products’ LNG process technology and equipment for an LNG project in Yinchuan, China. Technip is a world leader in project management, engineering and construction for the oil & gas industry. 

Air Products’ technology will be vital for Technip’s two liquefaction trains each producing 400,000 tons of LNG per annum for Ningxia Hanas Natural Gas Company, Ltd. Ningxia Hanas, formerly known as Yinchuan Natural Gas Company, is mainly engaged in city gas, gas supply to industrial and commercial users, gas heating, gas-fired power generation, gas-fired cogeneration, and environment protection. The units are targeted to be completed in the second half of 2011. 

Other terms of the agreement were not disclosed. Air Products has also signed a turnkey gas supply contract to provide its SunSource Solutions liquid bulk and specialty gases, related gas distribution equipment and engineering services to EI DuPont de Nemours & Company’s (DD - Analyst Report) subsidiary, DuPont Apollo (Shenzhen) Ltd. at its new amorphous silicon thin-film photovoltaic (PV) facility in China. 

The contract includes long-term supply of nitrogen, hydrogen, argon, oxygen and specialty gases, such as silane, as well as phosphine mixtures. Air Products has installed complete gas distribution systems from its source containers to the point of use within DuPont's Shenzhen facility. Just a month ago, Air Products had signed two industrial gas projects in China. 

One of the company’s joint venture company in Sichuan, China had signed an agreement to build an air separation unit (ASU) for PetroChina Company Limited (PTR - Analyst Report), one of the largest oil and gas companies in the world. The ASU, which will go on-stream in 2011, will supply oxygen and nitrogen to PetroChina’s main refinery and ethylene complex in Sichuan. 

Air Products also plans to purchase and operate four existing air separation units and build a new ASU, to be on-stream in March 2011, to supply industrial gases to Xingtai Iron and Steel Corporation, Ltd., one of China’s largest specialty steel manufacturers located in Hebei province, China. Air Products is the second largest industrial gas supplier in North America and the fourth largest in the world. The company serves customers in industrial, energy, technology and healthcare markets worldwide. 

In the third quarter of fiscal 2009, Air Products reported earnings of $1.05 per share, better than Zacks Consensus estimate of 98 cents. However, we remain concerned about the global weakness in electronic markets, broad-based weakness in Europe and fluctuations in foreign exchange rates & interest rates. We maintain our Neutral recommendation on the stock.