(PX) Praxair Wins Hydrogen Contract

Praxair Inc. (PX) entered into a long-term agreement with Motiva Enterprises LLC to supply hydrogen to the latter’s refinery in Norco, St. Charles Parish, Louisiana.

Recently, the industrial gas supplier has announced its decision to enhance its hydrogen capacity in Louisiana and expand its Mississippi River corridor hydrogen pipeline system. The company will connect the Louisiana hydrogen pipeline complex with its new plant being constructed in St. Charles Parish.

It is anticipated that by the second quarter of 2012 the construction work of the pipeline would be complete, while that of the plant would be accomplished by the fourth quarter of 2012.

It is evident from the present scenario that the growth prospects of industrial gas producers are very bright going forward, with demand for gases expected to increase manifold due to their wide application areas. Hydrogen for refining; oxygen for healthcare; and nitrogen and carbon dioxide for oil and gas production are being increasingly used.

The demand environment for hydrogen particularly, is very strong as it is increasingly used for refining purposes. Over the period 2010-2015, refining capacity is expected to grow by 2% in US/Europe, 15% in India, 20% in China, 24% in the Middle East, and 25% in Brazil. The company has an expectation of a 20% volume growth for hydrogen per annum going forward.

Praxair, one of the leading companies engaged in the production and distribution of industrial gases, primarily caters to demands in North America, South America, Europe, and Asia. Prime competitors of the company include Air Products & Chemicals Inc. (APD) and L’Air Liquide SA.

We currently maintain a Neutral recommendation on the stock.

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