APD Air Products and Chemicals Inc

Air Products & Chemicals Inc. (APD) grabbed a contract to supply onsite oxygen, compressed dry air, and nitrogen to INEOS Bio's joint venture in Vero Beach, Florida. 

Air Products has more than 50 years of experience in oxygen and nitrogen on site gas production. Nitrogen generators and oxygen generators are part of Air Products' high quality portfolio of onsite gas generation equipment providing reliable supplies of industrial gases.

Air Products will supply gaseous oxygen from a PRISM VSA Oxygen Generation System as well as bulk liquid oxygen and liquid nitrogen delivered to the site by trucks. 

INEOS New Planet is being built with an investment of more than $100 million and will be the first commercial scale plant to produce third generation bio-ethanol. Operations are expected to begin in the second quarter of 2012. INEOS also plans to expand the facility in 2015. The plant will occupy a site, which was earlier an agricultural processing facility.

INEOS New Planet BioEnergy received permits for construction of the new plant in October 2010. The permits were awarded after the environmental assessment study for plant established that the project will not have any adverse impacts on the region.

The project is expected to generate 175 jobs during construction and 50 permanent jobs during operation. The new plant will provide much needed employment in the region, where unemployment rate is 16%.

Renewable Fuel Standards (RFS-2) in the United States are driving substantial project activity in the area of advanced biofuels.  Many of these projects require industrial gases, particularly oxygen, hydrogen, and nitrogen.

In this area, oxygen is used primarily for gasification, hydrogen for oil upgrading to final biofuel products, and nitrogen as an inert and fluidizing medium. Global market demand for biofuels is likely to support significant growth in industrial gas use over the next 10 years.

Air Products' PRISM® Gas Generation Systems supplies nitrogen, oxygen, and hydrogen to more than 1,500 customers in over 30 countries worldwide. Global markets currently served by Air Products' PRISM 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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