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ArcelorMittal (MT) and Air Liquide Sign Gas Supply Contracts

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ArcelorMittal (MT - Free Report) has signed two long-term renewal contracts for the purchase of oxygen, nitrogen and argon with Air Liquide. Air Liquide will be supplying these gases to ArcelorMittal’s manufacturing facilities in the industrial port regions of Fos-sur-Mer and Dunkirk in France. Another contract for a new long-term supply to ArcelorMittal’s production unit in Ghent, Belgium has also been signed between the companies.

Air Liquide plans to extend its pipeline network in Benelux to support ArcelorMittal’s growing needs for industrial gases. The gases are required for application in a number of processes in the steel industry. The use of these gases helps improve the efficiency and energy performance of steelworks, while also reducing atmospheric emissions. Argon is used to produce high quality steel.

These three facilities of ArcelorMittal produce high value added steel which is used in the automotive, construction as well as packaging industries, and for other industrial applications. Air Liquide’s existing pipelines will continue providing the gases to the Fos-sur-Mer and Dunkirk facility and the Ghent facility will now be added to the company’s pipeline network.

The Air Liquide pipeline networks ensure consistency, performance and supply flexibility that is required for ArcelorMittal and are connected to several air separation units (ASUs) for the same. Air Liquide currently operates a pipeline network of 4,700 kilometers in Europe, making it the world’s most extensive network.

ArcelorMittal’s shares have gained 42.5% in the last six months, outperforming the Zacks categorized Steel-Producers industry’s gain of about 32.1% over the same period, supported by its focus on lowering debt as well as costs. The company is on track with its cost reduction actions. Cash savings in 2016 are expected to be over $1 billion, partly due to lower capital spending and reduced interest expenses resulting from debt cuts.

The company swung to a profit in the third quarter of 2016, from a loss incurred in the prior year quarter. The company posted a net income of $680 million or 22 cents per share. However, revenues declined 6.8% year over year to $14,523 million in the quarter, affected by lower steel shipments and steel prices.

Zacks Rank & Key Pick

ArcelorMittal currently carries a Zacks Rank #3 (Hold).

Better-ranked companies in the steel space include Commercial Metals Company (CMC - Free Report) , sporting a Zacks Rank #1 (Strong Buy), and Steel Dynamics, Inc. (STLD - Free Report) and AK Steel Holding Corporation , both carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Commercial Metals has an expected long-term growth rate of around 22%.

Steel Dynamics has an expected long-term growth rate of 12%.

AK Steel has an expected long-term growth rate of 5%.

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