Reporting on the business and technologies
driving today's global industrial gas industry

Feeling Un-Appreciated
By Art Waskey
2007.12
Recently, I was assisting with a rep’s technical quotation; he had spent a considerable amount of time learning and evaluating the customer’s manufacturing needs through plant visits and interviews with their engineers. Unexpectedly, we were notified that purchasing was initiating a two hour reverse auction (an on-line bidding frenzy where the last and lowest offer gets the award) to make the final vendor selection.

When was the last time you provided technical assistance and/or invested considerable communication time with a client only to learn that the decision-maker was making the final decision based solely on the lowest bid?
 />Jim Appledorn, Distributor Sales Manager, The Lincoln Electric Company, recently shared with me Lincoln’s internal strategy for resolving this issue. “We use four ‘customer buckets’ to identify client types: Value, Commodity, Service and Retail.”

   1. “Value” Customers have the capacity to understand and appreciate Total Solution and GCR (Guaranteed Cost Reduction) selling techniques. These programs include internal customer productivity audits and proposals guaranteed to reduce manufacturing costs. Presumably, customers will also be willing to pay for these services. This expanded perception of services makes investing more sales time justifiable.
   2. “Commodity” Customers (regardless of sales potential) typically will NOT pay extra for value-added services. Therefore, sales time allocations should be restricted when calling on this group. Assigning a salesperson who manages these customers by communicating basic pricing, inventory, and delivery information with minimal time involvement is recommended.
   3. “Service” Customers expect their suppliers to go above and beyond to meet their needs — and are willing to pay for this level of service. Identifying these accounts justifies extraordinary service with all employee/customer interactions.
   4. “Retail” Customers represent your stores’walk-in business. “Retail” customers require a unique emphasis on counter sales training, inventory, merchandising and store location.

Appledorn summarized, “Certainly, if the decision is to sell to them all, different strategies should be used to address these different types of customers.”

When the final vendor decision was made in the opening scenario, the Production Manager overruled Purchasing’s on-line bid auction and awarded the contract to their current supplier at a higher price. Realization set in that their current level of services would be jeopardized with the lowest bidder. The value of the services provided outweighed the commodity mentality of the lowest bid.

It has been written that the cost to acquire a NEW customer is seven times greater than the cost to retain an existing customer. Time spent in developing customer profiles and classifying your clients into these four groups is an excellent investment of your sales resources. Plan your time; maximize your sales ROTI (return on time invested). You will be profitably rewarded for your efforts!

Art Waskey is author of The Art of Sales in One Month. He can be reached via e-mail at awaskey@generalair.com.

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Basic Cryogenics — That Even I Can Understand
The Relationship of Temperature and Pressure to Saturation
By Keith Hall
2007.12
Ullage Pressure
The term "ullage" refers to the "head space" or "vapor space" above the liquid in the top of a cryogenic tank. Ullage pressure is the pressure of the vapor in the head space that pushes down on the surface of NPSH pressure is developed by the weight of the liquid in the vessel, and by the addition of artificial pressure to the head space, if needed. This head pressure serves to "push" down on the surface of the cryogen in the tank, effectively "pushing" it into the pump's the liquid in a tank.

Head Pressure
Head pressure is a combination of the vapor pressure in the ullage, or head space, and the pressure at the bottom of a vessel created by the weight of the liquid product. The taller the column of liquid (the higher the liquid level in the tank), the higher the pressure produced at the bottom of a vessel.

The ullage pressure and the weight of the liquid serve to “push” the liquid out of a vessel when pressure decant filling, or transferring product into a lower pressure vessel. Head pressure is also used to push the cryogen to its final point of use, or to push it into a vaporizer if the gaseous phase of the product is needed. Head pressure additionally is used to “push” the liquid into a pump.

Artificial Pressure
Over time, if the product in a cryogenic vessel is not used, ambient heat leaking into the tank causes the liquid to boil and the pressure in the tank to rise. This pressure rise is naturally generated head pressure. Artificial pressure is pressure that is intentionally created to increase the pressure in the ullage space of a closed vessel. In the cryogenic industry, the most common method used to create artificial pressure is to divert liquid out the bottom of a vessel, and pass it through a pressure building unit (PBU) to convert the liquid into gaseous vapor. The warm vapor is then routed into the head space of the vessel to increase the pressure in the ullage space. A PBU is a heat exchanger and is commonly made of extruded aluminum finned tubes. The aluminum fins serve to transfer heat, from the relatively warm ambient air, into the liquid, causing it to boil and vaporize. Typical cryogenic liquids expand 600 to 700 times in volume when they change phase from liquid to vapor! Liquid nitrogen, for example, expands 694 times in volume. One gallon of liquid nitrogen produces 93.11 standard cubic feet (SCF) of nitrogen vapor.

As described above, artificial pressure is used to promote or facilitate pressure transfer operations when off-loading product. Moreover, the addition of artificial pressure into the head space is often necessary before starting a cryogenic pump. Cryogenic pumps have a manufacturer’s specified minimum Net Positive Suction Head (NPSH) pressure requirement. This is the minimum pressure needed to push the liquid into centrifugal pump’s impeller to help catch and maintain prime.

NPSH pressure is developed by the weight of the liquid in the vessel, and by the addition of artificial pressure to the head space, if needed. This head pressure serves to “push” down on the surface of the cryogen in the tank, effectively “pushing” it into the pump’s impeller, helping the pump catch and maintain prime.

Artificial pressure, however, serves another useful purpose when pumps are involved. Besides “pushing” the liquid into a pump, the addition of 5 psi minimum artificial head pressure (above ullage pressure) serves to “sub-cool” the liquid, effectively preventing the liquid in the tank and pump from boiling. The artificial head pressure pushes down uniformly on the surface of the liquid, preventing it from boiling.

Cavitation is extremely detrimental to cryogenic pumps and results from liquid boiling in the pump. Chief among causes of cavitation are: 1) starting or running a pump with insufficient artificial sub-cool pressure. Before starting a pump a minimum of 5 psi must be added to, and maintained in, the head space, to prevent the liquid from boiling; 2) insufficient cool down time before starting a pump (if the pump is warmer than the liquid, boiling within the pump will occur). As a general rule of thumb, cryogenic pumps with an impeller diameter smaller than seven inches should be cooled down a minimum of seven minutes before starting the pump. Pumps with an impeller diameter larger than seven inches should be cooled down for a minimum of 12 - 15 minutes.

In review, the intentional increase in pressure to the head space of a tank is termed “artificial pressure” because it is not generated by natural heat leak into the tank. However, if the artificial pressure is allowed to remain in the tank (e.g. if the artificial pressure is not blown down after completing a fill), over time the heat in the vapor will be conducted into the colder liquid (the temperature of the vapor will drop and temperature of the liquid will rise until they come into equilibrium). The result is warmer liquid.

Temperature and Pressure
Temperature and pressure are directly related to each other. As temperature increases, so does pressure. Controlling heat and pressure are perhaps the most important, yet common things we do in the cryogenic industry. We try to limit the transfer of heat into the cryogen when we need to store or transport it. Conversely we intentionally add heat to liquid when we want to vaporize it. We add artificial pressure to the head space when we wish to withdraw liquid from a vessel, and/or reduce pressure in the receiving vessel. We also try to maintain cold, low pressure liquid to a pump, and increase pressure for end use operations such as laser cutting. Understanding such basic principals of physics as temperature and pressure allows us to harness and control them, using them to our benefit in the cryogenic world.

Saturation
Saturation is an important, yet seldom fully understood concept in the cryogenic industry. An understanding of the term “saturation” is necessary if we are to efficiently harness and exploit the benefits to be realized from using cryogenic liquids in our specific industries.

We are all familiar with the common kitchen sponge that when “saturated” can hold no more water and begins to drip. Similarly, the term “saturation” is also applied to liquids when they become saturated with heat.

At sea level, water becomes saturated with as much heat as it can hold, when at 212° F it begins to boil. The temperature of the water will not increase above 212° F, even if more heat is added. The addition of more heat simply makes the water boil harder, converting it to steam more quickly.

As the temperature increases, molecules become more active and move farther and farther apart from each other. At 212°F (100°C) at sea level, H₂O molecules have enough energy to burst free from the surface of the liquid in the form of bubbles as they turn to vapor. The escaping molecules can no longer be held below the surface of the water by the force (pressure) of the atmosphere pushing down upon the surface of the liquid. The boiling water, then, is saturated with heat at atmospheric pressure.

Saturation — Pressure Versus Temperature
If we carry a cooking thermometer with us on a backpacking trip in the beautiful Uinta Mountains of Utah, we would discover that when we build a campfire at 11,000 feet and boil our dinner, the temperature of the water does not reach 212°F (100°C). Instead, the water begins to boil at 192°F (89°C)! As elevation increases, atmospheric pressure (the weight of air) decreases. The column of air from the mountain top to the edge of space is not as tall as the column of air at sea level (see “Pressure and Vacuum” column, CGI, April 2007). The weight of the air at 11,000 feet does not press down as hard on the surface of the water as at sea level At this elevation, the H₂O molecules have enough energy at 192°F (89°C) to burst free of the surface of the water and convert into steam. And since the water boils at a lower temperature, the food takes longer to cook.

In contrast, a pressure cooker decreases cooking time by increasing pressure and temperature. The steam in the “ullage” space of the pressure cooker pushes down on the surface of the liquid like a firm invisible hand. The additional pressure created in the pressure cooker as steam builds, temporarily prevents the liquid from boiling. It is only after additional heat has been added to the liquid in the pressure cooker that it finally becomes saturated with sufficient heat energy to begin to boil, and the petcock (relief valve) begins to rattle. Both the liquid and the vapor are saturated at approximately the same temperature, around 260°F. Since, with the additional energy, the temperature of the liquid is higher than it would be if the pot were left open, the food cooks faster.

Another Example
The dangerous and unsafe act of removing the cap from a hot automobile radiator is a common example of what happens when pressure is suddenly reduced from a vessel saturated at a higher pressure. Scalding hot coolant and steam forcefully spew out from uncapped radiators, potentially causing serious burns. Not only is coolant lost due to the sudden pressure release, but additional coolant is lost as the liquid continues to vigorously boil, turning the coolant into steam. The boiling continues until the coolant has released sufficient heat energy (turning liquid into steam) so that atmospheric pressure suppresses the boiling, and temperature and pressure reach equilibrium.

Both pressure and temperature are directly related and we can express the saturation point of a liquid as either a pressure or a temperature. We can use a pressure gauge or a thermometer to determine the saturation point of a liquid. For example, if we state that the saturation pressure of water is 0 psig sea level, then we can deduce that the corresponding temperature of saturation is 212°F (100°C).

Saturation of Cryogenic Liquids
Due to heat leak, the pressure in a cryogenic vessel will rise overtime if the product is left unused. Cryogenic vessels are designed to minimize heat-leak, however, some heat still manages to get in and eventually saturates the liquid. Once saturated, the liquid boils and some of the liquid is converted into vapor. This vapor, added to the ullage space above the liquid in the closed vessel, causes the pressure in the tank to increase; pressing down harder on the surface of the liquid. This in turn causes the liquid to stop boiling. But as heat constantly leaks into the vessel, this natural pressure building process continues. Eventually the primary safety relief valve will open to relive the pressure, and the liquid will remain saturated at, or near, the relief valve pressure setting.

Thus, in the cryogenic industry, saturation is generally expressed in terms of pressure, not temperature. This is primarily due to the fact that most cryogenic vessels are equipped with pressure gauges, not thermometers. And since we know that pressure and temperature are directly related, we are accustomed to expressing saturation as a pressure.

For example, if someone observes that the natural pressure of a cryogenic vessel is 100 psig, he or she can accurately state that the cryogen contained therein is saturated at 100 psi. This means that if even one more BTU of heat leaks into the tank, the liquid will begin to boil, and the pressure will rise.

Product Loss
In the cryogenic industry it is important to remember that, like a hot car radiator, if you vent a tank down, the product it contains is going to boil. This boiling-off of heat results in a phase change of some of the product into vapor. It is a common misconception that if you vent, or blow a tank down, the only product lost is the vapor in the head space above the liquid. In actuality, as we have learned, the vapor above the liquid is lost and also a significant quantity of liquid, which turns to vapor as it boils off heat to re-saturate at the lower pressure. The “invisible hand” of pressure that was pressing down on the surface of the liquid, preventing it from boiling, has now been removed.

Rules of Thumb to Estimate Product Loss Due to Venting
To the left, are useful “rule-of-thumb” tables for LIN, LAR, LOX, and CO₂, which permit you to estimate how much product is lost when venting a tank with the liquid saturated at a given pressure.

Using the table to the left for liquid nitrogen, and using a 1500 gallon liquid nitrogen tank saturated at 200 psig, as an example, we can estimate that if we vent the tank completely down to atmospheric pressure (0 psig), we would loose approximately 35 percent or 525 gallons (0.35 X 1500 = 525).

If the same tank, still saturated at 200 psig, were instead vented down to 80 psig, only 15 percent, or 225 gallons, of liquid nitrogen product would be lost ((0.35 X 1500) - (0.15 X 1500 = 225)).


Keith Hall is the Customer Technical Support Manager at Cryogenic Vessel Alternatives, and can be reached at khall@cvatanks.com or by phone at 281-385-1204.

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China Industry News
Air Liquide
2007.12
Air Liquide signed a long-term agreement with Dongbei Special Steel Group in Dalian, Liaoning Province, China. AL will install a new air separation unit (ASU) with a production capacity of 550 tons per day (tpd) of oxygen to supply gaseous oxygen, nitrogen and argon by pipeline to the new Dongbei Special Steel Group steelworks. This unit, which includes a capacity of 200 tpd of liquid products, will also enable Air Liquide to develop the local industrial market.

Dongbei Special Steel Group, a leading manufacturer of high value-added special steel products, has started an ambitious relocation and upgrade of its production facilities and will outsource its industrial gas requirements. To meet the needs of this customer, Air Liquide will invest more than 20 million euros in a new ASU, to be commissioned in mid-2008. The unit will be designed and manufactured by Air Liquide Hangzhou, the Air Liquide engineering center in China, and will use the latest technologies of the Group providing both high reliability and high energy efficiency, in line with Chinese government objectives.

Jean-Pierre Duprieu, Senior Vice-President Asia-Pacific and member of Air Liquide’s Executive Committee, said: “With this new investment we will enter the fast growing Dalian market, which will provide new opportunities to develop our business. It is also further proof of the willingness of the Group to accelerate its investments in emerging markets. With 20 percent of the Group’s total sales, Asia is at the center of our growth ambitions.”

In China, Air Liquide also recently made its first acquisition in homecare, by taking over Celki International, a company established in Hong Kong and in the south of China. With 130 employees, Celki supplies respiratory products and services to the Chinese market. This company will serve as a base for expansion, to identify and seize opportunities in the new homecare market in China.

In the semiconductor market, Air Liquide signed a 15-year contract with SMIC (Semiconductor Manufacturing International Corporation, the largest and most advanced foundry in China) to supply onsite bulk carrier gases to their future Fab in the Wuhan East Lake high-tech development zone. The project is mainly sponsored by the Wuhan Government.

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China Industry News
Air Products
2007.12
Air Products has embarked on a major expansion of its China Technology Center in Shanghai to support the fast-growing businesses in Asia. The expanded center will further complement Air Products’ regional technology centers in Japan, Korea and Taiwan.

The expansion, built on space adjoining the current facility, has a high bay which is equipped with two high-pressure polyurethane machines and accessory tools for both rigid and flexible applications that supplement the existing shoe sole capability. Two spray booths, aqueous and non-aqueous, will be used for spray coating development. The new space also features a general-purpose lab with additional fume hoods, expanded chemicals storage areas and associated office space to provide new application and product development, technical services, process R&D and in-region analytical to support all businesses including Gases, Performance Materials, and Electronics.

The expansion of the China Technology Center will enable Air Products to enhance its capabilities and material solution offerings, and bring support closer to its key customers in Asia, particularly in sectors such as polyurethane, coatings, inks, adhesives, civil engineering, personal care, cleaning, mining, oil field and other industries. These markets are growing at over 10 percent a year, and growth is expected to accelerate as China continues to develop as a global manufacturing center.

Air Products also acquired all outstanding shares in Air Products Shanfeng, making the venture a wholly-owned Air Products subsidiary in China. This strategic move is part of Air Products’ focus and investment in the performance materials business in China.

The official name of the new company is Air Products and Chemicals (Changzhou) Co., Limited. Air Products Shanfeng was first established in 2005 as a joint venture with Changzhou Shanfeng Chemical Industry Co Ltd., a leading chemical supplier in China.

Air Products Shanfeng, including its production site in Changzhou, Jiangsu Province in East China, was formed to support the growth of Air Products’ triethylenediamine (TEDA) business for the polyurethane foam market in China. This market has been growing at more than 10 percent annually in China and is expected to continue to experience high growth rates as China becomes a global manufacturing center.

To align with the change, TEDA manufactured at the Changzhou facility will come under the Air Products global brands Dabco® chemical catalyst crystal, and the Air Products Shanfeng TEDA brand will be discontinued.

Air Products also continued its participation in a large syngas project in China with the signing of a second long-term contract with Wison (Nanjing) Chemical Company Ltd. AP will supply on-site gaseous oxygen and nitrogen to Wison’s syngas plant located in the Nanjing Chemical Industrial Park (NCIP), Nanjing, Jiangsu Province, Eastern China in support of Wison’s phase two expansion plan. Under this contract, a new ASU that is capable of producing greater than 1,600 tons per day of oxygen will be built close to Wison’s first ASU in the NCIP.

Wison will use the high-pressure oxygen in the coal gasification process to produce syngas, which can be separated into carbon monoxide (CO) and hydrogen. Syngas, CO and hydrogen are important precursors to produce other basic chemicals such as methanol and acetic acid, which enter into a variety of products such as paints, adhesives, plastics, construction materials and hundreds of other products for the growing consumer markets in China.

Air Products also supplies oxygen and nitrogen to other customers in the NCIP via pipeline. This second ASU in the NCIP can also produce liquid argon in the future and enables Air Products to further expand its liquid product capacity economically to meet growing demand in Eastern China, especially from the steel and automobile industries. Nanjing and other cities in Jiangsu Province have attracted substantial investment from both Chinese and international manufacturers.

Air Products was also awarded a new contract by Tangshan Guofeng Steel Co Ltd (formerly known as Xinfeng Steel Group) for the supply of industrial gases. This is the third Air Products long-term contract signed with Guofeng Steel since 2003 to supply gaseous oxygen, nitrogen and liquid argon to its steel mills in Hebei Province, Northern China. A new ASU adjacent to Guofeng Steel is scheduled to come on-stream in late 2008. Steel production in China is growing at about 16-18 percent per annum and this will be the third Air Products- built ASU in Tangshan for Guofeng Steel. The on-site gaseous oxygen, nitrogen and argon are used in Guofeng Steel’s blast furnace and basic oxygen furnace for iron-steel making. The new ASU will be designed and built primarily by Air Products engineering and manufacturing centers in China.

Air Products signed a long-term contract to supply gaseous oxygen to China’s Jushi Group Co., Ltd., the largest fiberglass manufacturer in Asia. This is the third contract awarded to Air Products in support of Jushi’s glass production in Tongxiang, Zhejiang Province. Under this agreement, Air Products will build a new air separation unit (ASU) and oxygen generator to supply on-site oxygen to Jushi. This is the second AP-built ASU supporting Jushi since 2004. The two ASUs will also produce 600 tons per day of liquid products to supply additional customers, further expanding Air Products’ liquid production capacity to meet the fast-growing liquid demand in Eastern China.

The new ASU will be designed by Air Products’ engineering center located in Shanghai, and built at its manufacturing plant located at Caojing in Shanghai. Jushi, located in the Tongxiang Economic Development Zone, has built the world’s largest fiberglass furnace and has embarked on a multiple phase plan to increase production capacity. Air Products’ oxygen will be used in the oxy-fuel glass melting process to provide a high-energy and efficient process that is also environmentally friendly. In the growing flat panel display industry, Air Products has brought a new nitrogen plant in China on-stream for InfoVision Optoelectronics (IVO), a leading Chinese producer of flat-panel displays. It is the first nitrogen plant of its kind that was designed and built locally in China.

The new plant is based on Air Products’ high-efficiency design, which delivers nitrogen to customers in the electronics and other industries around the world. This plant is located at IVO’s factory in Kunshan, Jiangsu Province and provides nitrogen to IVO under a long- term contract. IVO produces 5G TFT-LCD panels in a state-ofthe- art production center that represents a US$1 billion investment and is a major project under China’s Eleventh Five-Year Plan.

The plant is also the first Air Products nitrogen plant in China commissioned using local resources including design, manufacturing, and construction. The cold box was fabricated by Air Products’equipment manufacturing facility in Caojing, Shanghai, and the main air compressor was assembled locally. Strategically located adjacent to ShanghaiChemical Industry Park, Air Products’ facility in Caojing has broad capabilities to design, engineer, and manufacture cryogenic equipment to support air separation unit projects in China and other Asian markets. The Caojing facility is complemented by Air Products’ engineering center in Shanghai, which handles engineering design, project development, and project management.

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China Industry News
CHART
2007.12
In the September 2007 Chart Asia Review, the company reports that after nearly five months of construction work, the Chart China facility expansion is completed. In order to meet the rapidly increasing production capacity requirements, the facilities A and B workshops were extended, while the E and F workshops were newly built. In addition, and simultaneously, two 80-ton and two 100-ton cranes were installed. The office building was also nearly doubled in size to hold up to 300 office employees. With these expansions, Chart China reports that this facility is becoming one of the most dynamic manufacturing bases of Chart worldwide.

Chart Cryogenic Engineering Systems (Changzhou) Co., Ltd. (CCESC) passed ISO9001:2000 Conformity of Quality Management System Certification and received Certificates of Registration from the ANSI-ASQ National Accreditation Board (ANAB) and the United Kingdom Accreditation Service (UKAS). In order to enhance and improve the standardization and quality of CCESC’s product management and manufacturing, to satisfy customers’ requirements, and to provide applicable products in compliance with referenced regulations, CCESC was assessed by Guangdong Zhonqian Certification Co., Ltd., a China-certified organization, and earned the Certificates of Registration for ISO9001:2000 from ANAB and UKAS for the design, production, and service of cryogenic insulation vessels.

CCESC has written a “Quality Manual” according to the ISO9001:2000 Requirements of Quality Management Systems, taking into consideration its own product features. Following this manual will standardize the activities of quality management in CCESC. This “Quality Manual” outlines the criterion for managing to the highest product and quality and can verify CCESC’s production capability to customers. In other company news, Chart Energy & Chemicals, Inc. was awarded a significant contract from Praxair Asia to supply brazed aluminum heat exchangers for a Praxair air separation unit (ASU) to be located in Zhenjiang, China. The ASU will supply industrial gases to an acetic acid plant operated by Jiangsu Sopo Group and is due to come on stream in 2009. (See full story on Praxair plant on page 38, CGI April 2007.)

“This award from Praxair comes at a time when Chart is experiencing an increase in orders across much of China. China continues to increase the use of syngas, derived from coal gasification, as a chemical feedstock for various production applications,” said Sam Thomas, Chief Executive Officer and President of Chart Industries, Inc. “Chart has a history of supplying Praxair with its brazed aluminum heat exchanger technology and looks forward to delivering another successful project to the Praxair team and its customer Jiangsu Sopo Group.”

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More Than 1000 Eye Injuries Occur Daily In Industrial Settings
By Jim Herring
2007.12
The other day we issued another in a long list of warnings to employees about wearing proper eye protection while they are engaged in any activities that could possibly cause injury. Eye injuries are a major concern in metal shops such as ours, so we have to stay on top of this safety issue. We even threaten to send folks home if they refuse to wear proper eye protection while engaged in manufacturing operations throughout the plant. We stress this topic so often that I began to wonder if the issue was really as much of a safety concern as I was led to believe. So I spent a recent afternoon researching the topic on the US Department of Labor, OSHA website. The data more than vindicated my concern. Every day, approximately 1000 eye injuries occur in US manufacturing facilities. The cost exceeds $300 million in lost production time, medical expenses, and workers compensation claims. And, that does not include the personal loss of income or loss of eyesight to the injured parties. You don’t have to operate a metal processing plant to have eye hazards at your place of work. Potential hazards can be found in almost every manufacturing plant in the country. Service providers aren’t exempt, either. Conduct a walk-through at your facility or on one of your job sites. The potential hazards are there and easy to identify. Power tools used to cut, drill, mold or shape wood, metal or plastic materials are perhaps the single biggest contributor to eye injuries. Flying particles, many smaller than the head of a pin, are among the most common problems. As a matter of fact, according to the OSHA website, flying particles account for more than 70 percent of all industrial eye injuries. Chemicals are the next largest contributor, being responsible for 20 percent of all industrial eye injuries. Other culprits include objects swinging from a fixed or attached position, like tree limbs, ropes, chains, or tools, which were pulled into the eye while the operator was using them. As serious as this problem is, it is one of the easiest to correct and avoid. The vast majority of eye injuries would have been avoided had the injured party been wearing the proper eye protection. It is estimated that three out of every five workers injured were not wearing eye protection at the time of their injury. The key word here is PROPER eye protection. Many accidents occurred, according to the website, because the injured party did not wear safety glasses with side shields. The message this month is clear — make sure your employees wear proper eye protection at all times. Who knows, you might save someone his or her eyesight. I don’t know about you, but I consider sight to be the most valuable of our five senses. Until next month, be safe. Jim Herring is Vice President of Marketing and Procurement at Saf-T-Cart in Clarksdale, Miss. He can be reached via email at jim@saftcart.com.

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Industrial Gas Company News
By Fred H. Siemer, CFA
2007.12
Economic Overview — If Wall St. rises on a wall of worry, the stock market should be setting new highs. Although the liquidity squeeze caused by the collapse of the housing bubble and the sub-prime mortgage crisis has been somewhat ameliorated by the 0.5% reduction in the Federal Funds Rate, a new crisis has arisen regarding the inability of the major banks to finance the billions of dollars of SIV and other mortgage backed paper. Much of this off-balance sheet debt may have to be written down and carried on the books of these commercial banks. Secretary Paulson has moved to establish a $100 billion pool funded by the major banks to provide liquidity to maintain the integrity of these obligations, thus freeing up funds for normal commercial lending operations. Many view this fund as a “bailout” of the banks, primarily Citibank, and it is not certain that this move will be a success. It seems certain, that for the near future, it will be more difficult to obtain commercial loans. This uncertainty and the difficulty in judging the extent to which problems in the housing sector will spill over to the economy overall are pressuring stock prices. Estimates for 2H GDP growth for 2007 are now generally below 2%, but this must be too low considering the growth of 4+% in Q3. As we are now in the Q3 earnings-reporting season, investors are nervously focusing on corporate profits. Although companies with exposure to housing and autos undoubtedly will have poor prospects, the companies we follow in the chemical and industrial sector should still report strong yty earnings comparisons. This mixed bag of corporate earnings reflects the mixed results for various components of the economy.

Certainly there are clear negatives. Sales of New Homes dropped 8.3% in August mo.-to-mo. Homes priced above $500,000 were particularly hard hit. Only about 6,000 homes at this price level were sold in August, down from 11,000 in August of 2006. The Architecture Billings Index fell to 51.1 in September from 53.9 in August. The inventory of unsold homes continues to grow, suggesting the housing slowdown will last into 2008. Orders for Durable Goods fell 4.9% in August from the 6.1% strong gain in July. This decline raised concerns for Business Spending. A key component of spending, orders for non-defense capital goods, excluding aircraft, fell 0.7% mo-to-mo. in August. The unemployment rate rose by one-tenth of a point to 4.7%, the highest level in a year. But even here, the employment reports give a mixed picture. Wage growth is one of the few remaining sources driving consumer spending. Hourly Earnings rose by 7 cents in September, a yty gain 4.1%. Recalling that a 4,000 job decline estimate in August may have been an important component of the Fed’s rate cut, we learn that this number has been revised to show a gain of 89,000 jobs. An upward revision was also made to the July job estimate, and in October, 166,000 new jobs were created. In September, the Conference Board’s tally of 4.27MM job openings showed an increase of 17.5% yty. The U. of Michigan consumer sentiment dropped to 82 in October, down 1.4 points from the prior month. All these conflicting signals confuse the market and create uncertainty. Markets detest uncertainty.

Offsetting the mixed signals in employment there are a number of quite positive economic indicators. The Conference Board’s index of leading economic indicators advanced 0.3% in September. World economies remain strong and the weak US dollar is aiding exports. US exports have risen at an annual rate of 8.8% since the fourth quarter of 2005. The Chemical Industry Trade Balance turned positive for the first time in almost two years in June. Industrial production in the Euro-Zone rose 1.2% and 4.3% yty in July and August, respectively. However, consumer price inflation in the EU leapt 2.6% in October suggesting the EU economy is approaching “bubble” status. I am not sure how long the EU Central Bank can hold off on interest rate increases. This would spell further weakening of the US dollar. Core inflation in the US was only 1.8% annualized in Q2, but one wonders how long this can persist with higher import and oil prices. The US manufacturing index remains above the threshold 50.0 yardstick, at 50.9 in October, 52.0 in September, and 52.9 in August. Factory inventory levels contracted for the 14th straight month in September, but turned up suddenly in October - another mixed signal that is causing some economists to downgrade the GDP estimate to 1.1% in Q4. US industrial output rose 0.1% in September despite slowdowns in autos and housing related products. While the value of private residential construction is falling, non-residential construction was up 15.2% yty in August. Perhaps the most important statistic — retail sales — rose a larger than expected seasonally adjusted 0.6% in September. Pessimists point out that this does not guarantee a strong holiday season, but I see the glass as half full. Industrial gases are part of the “Main Street Economy” and so far have been insulated from the “Wall St. Economy.” I feel there is not yet sufficient evidence that suggests the US economy will fall into recession.


INDUSTRIAL GAS PERFORMANCE
I continue to hold a positive view for the industrial gas industry. The industry is a lagging sector in the economy and recent financial problems in Housing related markets have not yet had a material effect on quarterly earnings. The average yty sales growth for the three major US based gas companies was about 7% in Q3 2007, with acquisitions, currency, and gas pass throughs pushing reported average sales gains to 17%yty.

Operating Profit margins for the major players increased from 30 to 80 basis point yty, as selling prices generally increased faster than electric power costs, and new plants enjoyed operating leverage. Average eps gains for the three major US-based firms were running at over 25% yty. Earnings in the latest quarter were up nicely yty, as shown in Figure 2.

While I feel comfortable that the impact from the financial problems in the US will bypass the industrial gas end markets, the gas sector has experienced an upward revision of its earnings base as a result of a boom in infrastructure spending, energy, and environmental/regulatory forced demand. In many instances, such as refinery hydrogen, demand is driven now as much by economics as regulation. Thus, I expect current demand and earnings to be a ten-year secular, rather than a two-year cyclical phenomenon. However, the 20+% gains in sales and earnings of the last two years in transit to a new level of earnings will most likely not be sustainable. The less than 10% gain in 2008 earnings forecast for Lincoln Electric may be more characteristic of the future performance of the basic industrial gas business. Certainly, individual companies can outperform the secular base earnings growth by acquisitions, or penetration of new markets in emerging economies (Note the eps performance of Airgas in Q3 vs. LECCO). If investor expectations match the annual 4-6% volume, 3% inflation pricing, 2% cost reduction growth with add-on’s from dividend increases and share reductions resulting from the superior cash flow from this industry, all will be well with share prices and the investment retention rationale for industrial gas stocks.


COMPANY COMMENTS

Airgas (ARG)
While weakness in housing, autos, and some segments of the commercial construction market has reduced industrial gas demand somewhat in these sectors, strength in energy, shipbuilding, and infrastructure repair continues. For ARG, this propelled yty same store sales gains of some 6% in FQ2. Overall sales were up 27% yty, with acquisitions providing 21% of this increase. Hard good sales were up 7% and gas & rent 5%. Operating earnings advanced 41% yty, and margins at 11.5%, showed a 70 basis point yty improvement, which would be 80bp, if the 4cents/sh integration expense for Linde Packaged Gas had been excluded. Sales for Distribution were $835MM, up 27% yty. Same store sales were 6% of this gain. Operating earnings advanced by 42%. Gas & Rent sales mix was 53.6%, up slightly yty. Sales for all Other operations at $212MM were up 43% yty, with gains in operating earnings of 16%. Earnings per share were 63¢, a gain of 29% on adjusted prior year earnings. The company’s guidance for FQ3 is a range of $0.63 - $0.65/sh, including a 1¢ charge for acquisition integration expense. The growth investment story at Airgas has always been about acquisitions. The company is considering several additions, primarily in the Distribution Segment. Purchase EBITDA multiples are expected to be in the 6.5-7.0x range. Demand remains strong in almost all geographic regions and the company expects eps gains of up to 30% yty to $2.58-$2.63/sh in FY2008. Current results are somewhat constrained by supply shortages of helium, although the argon supply situation has eased somewhat. Resolution of these supply problems, new acquisitions, and the integration of the Linde assets will be a source of future earnings growth. Management’s ability to finance a major new CO2 plant at Deer Park, TX, with a long-term supply contract. and to consider several new acquisitions, speaks to their confidence for the prospects for Airgas and the Industrial Gas Market. Recall that my analysis of the company’s financial position requires continued growth in earnings to avoid credit rating downgrades. (see Cryogas International, November 2007).


Air Liquide
For Q3, AL reported revenue of Euro 2,941MM, a 10.3% increase yty. Foreign exchange was a negative 2.4% and the acquisition of Lurgi Engineering added 0.5%. Sales on a comparable basis were up 7.4% yty. Gases & Services sales of Euro 2,485MM were up 7.9% yty on a comparable basis. All business lines and geographies contributed to this good performance. Operating margins continue to improve in Gases & Services due to productivity improvement programs. Margins should remain stable, rather than expand from current levels, as a result of the higher weighting of Engineering in the corporate product mix. Comparable sales by Region for the Gases & Services Group were 7.6%, 2.7%, 16.1%, and 11.5% for EU, Americas, Asia/Pacific, and Middle East/Africa, respectively. By End- Market, comparable sales were up 5.4%, 6.4%, 20.1%, and 11.1% for Industrial Merchant, Large Industries, Electronics, and Healthcare, respectively.


Revenues in the Americas was Euro 620MM up 2.7% yty. Significant customer plant turnarounds in the US hurt results, which declined 1.9% yty in the Large Industries segment. Sales advanced by 5.7% in Industrial Merchant markets due to good pricing action in the US and sustained growth in South America. Electronics registered growth of 4.2% due to a strong carrier gases market and one-time equipment sales to a major plant start-up. In Europe, sales gains were paced by Industrial Merchant, Large Industries and Healthcare, which advanced 5.5%, 10%, and 10.7%, respectively. Electronics declined by 4% due to lower equipment sales, as no new fab projects were started in the EU in 2007. Asia/Pacific was again the sales growth leader with gains of 34.7% in the booming Electronics market. Sales in the Large Industries sector were up 15.7% primarily due to the ramp up of recently installed capacity. Further new plant start-ups in China will come in the second half of 2008. Healthcare was up by 25.1% by entry into China with the acquisition of Hong Kong based Celki. For the Group, Capital Expenditures will be in the area of Euro 1.45Bil., approximately a 30% increase yty. Year-to-date acquisition expenditures were about Euro1.2Bil. The worldwide Outlook remains positive. AL has seen only limited signs of slowdown in the US, and good growth continues in the EU and A/P. The company continues to project double-digit earnings growth for 2007.

Air Products (APD)
For fiscal Q4, APD reported sales of $2.6Bil up 12% yty. Operating income advanced some 22% yty and reported eps, excluding extraordinary items, was $1.17/sh, a 26% yty gain. Tonnage Gas sales, at $690MM increased by some 12% yty. Volume added 10%. Selling prices declined by 2%, impacted by gas pass-throughs, which declined in the quarter along with prices for natural gas. Foreign exchange and acquisitions each added 2%. Operating income for the Group increased only 1% yty, since results for the prior year were aided by hurricane related insurance settlements. Margins expanded by 170bp, without the benefit of gas pass-throughs, to 15.2%. Volume gains and subsequent operating leverage in new plants were important contributors to these excellent results. Merchant Gas sales at $855MM were up 18% yty. Volume contributed 3% to increased sales, with selling prices, acquisitions, and foreign exchange contributing 4%, 6%, and 5%, respectively. Liquid/Bulk volumes were: — NA down 1%; EU down 2%, with gains of 18% in Asia/Pacific. Shortages of helium and argon were largely responsible for any volume shortfalls. Merchant LIN/LOX pricing was up in all areas. I am encouraged by the pricing action in NA, where a 3% yty gain suggests that industry-pricing momentum still remains positive. Operating income of $155MM increased 20% yty. Margins at 18.1% were up 30bp.

Performance Materials & Electronics sales were up 5% yty. Pricing for gases in Electronics, is still very competitive. For the Group pricing was down 2%. Volume, ex. Equipment which declined 3%, was up 9%. Performance Materials volumes were up 8% yty. Operating income for the E&P Group was up 2% yty, with the 40bp improvement in margins due to restructuring actions taken in Electronics. Energy & Equipment Group sales of $124MM were down 4% yty, largely due to lower LNG completions in the quarter. The backlog has slipped to $258MM, which was down 42% yty. Operating income of $18MM was up 9% yty, but profits are expected to be down yty in 2008.

Problems in the US Healthcare Group continue. Volume increases seem difficult to achieve and cost increases for new personnel are dragging down operating profit. Operations in the EU continue to do well driving sales for the Group to $160MM, up 7% yty and operating profit, at $9MM was up yty.

Sales for the Chemical Group at $252MM were up 13% yty. This gain was entirely due to volume, as 2% changes in Price/Mix and Currency were offsetting. In the quarter, APD negotiated the sale of its HPPC, or High Purity Process Chemicals Business. This sale is expected to close at calendar year-end and thus, was classified as a Discontinued Operation for purposes of reported results. The company hopes to close on the sale of its’ Polymers Business by year-end. The company did not receive adequate bids for the sale of its Polyurethanes & Intermediates Businesses, so they will retain owner-ship and report results in the Tonnage Gases Segment. This allocation seems somewhat incongruous. Are the products gases? Are they delivered by pipeline? Are sales contracts fifteen year take-or-pay? Are the customers on-site users of industrial gases? The company’s position is that sales are tied to take-or-pay contracts and that the customers also take pipeline gases from a production complex that has significant gas assets, as well as chemical facilities. I still feel this Business should be reported in a Chemicals Group, along with Performance Chemicals. Moving PU to Electronics and Performance Chemicals was not chosen, since apparently Electronics cannot stand further margin dilution from APD’s persistence in operating non-gas chemicals business. These weak sisters must be hidden in Groups where operating profits can absorb sub-par chemical operations. Burying low margin chemical businesses in industrial gas business segments will only hurt profitability comparisons with competitors, such as Praxair, and result in a continued APD stock P/E discount. Shareholder returns will continue to suffer by the retention of these chemical operations. Meanwhile the outlook for gases is positive and APD is looking for a 100bp improvement in profit margins in FY 2008. Earnings for FQ1 should be in the range of $1.08-$1.13 and in the range of $4.80-$5.00/sh for the year.


Lincoln Electric (LECCO)
Although there has been some weakening in US markets as a result of the collapse in residential housing, strength in worldwide energy and some construction markets continues to provide positive results for Lincoln Electric. For the last quarter, sales increased by 14% to $565MM, volume added 4% to this gain and selling price and foreign exchange added 5% and 3%, respectively. Acquisitions added 2% to sales gains. Adjusted net income increased by 12%, to $50MM or $1.15 per share. The company does not provide earnings guidance, so it is not clear of what import to assign to a result which missed the “Street” guesstimate of $1.20/sh. Global demand again is the primary driver of improved results.

Sales of Lincoln subsidiaries outside of North America increased to $218MM, a gain, in local currencies, of 19% yty. Sales for the Company’s North American operations were $347MM, an yty increase of 5%. Export sales increased 20% to $51MM. Sales gains in North America, while still strong, represented some slowdown in the yty rate of increase. In the quarter, sales gains in Latin America and Asia/Pacific were up about 40% yty. The company is straining to meet demand, and is adding capacity outside of the US. Double-digit sales gains were realized in Europe, but activity may slow somewhat in the coming year. Investors should reflect on the traditional GDP type volume growth rates for the welding products business. The tremendous surge in infrastructure spending in emerging nations has lifted sales and profits for LECCO to new levels, but growth from here on will more reflect traditional patterns, than the boom conditions of 2006/2007. I expect eps growth of about 6% yty in Q4 and 8%for the year 2008. Cash flows in the 9 months of ’07 were $204MM, more than double that of ’06. Future earnings gains of close to 10% annually and prospects for dividend increases and acquisitions, share buybacks offer reasons for retention of the shares.

Harsco (HSC)
Harsco reported strong earnings in the third quarter, demonstrating that strength in commodities and capital goods markets benefits players at all levels of the supply chain. EPS for the quarter, for continuing operations, was $0.83, up some 30% yty. Corporate sales were up 20% yty to a record $927MM. Organic growth contributed 9% to sales, Acquisitions 6%, and Foreign exchange 5%. Operating margins improved by 70 bp to 13.4%. Access Services had sales of $351MM, a gain of 26%. Organic growth contributed 19%, with currency and acquisitions adding 1% and 6%, respectively. Operating income increased some 36% and margin gains of 100 basis points, to 13.7% were realized. Minerals & Rail Technologies, Services and Other Products report sales of $200MM some 35% higher than the prior year. Organic sales growth contributed 14% and the February 1 acquisition of Excell Minerals added 20% to the gain. Operating income increased by some 68%, and margins of 21.1% were 410 bp higher than last year. The outlook for this business sector remains positive, with strong second half performance led by Excell and Harsco Track Technologies, but all six segments of this Group reported higher operating income and margins in the quarter.

The Mill Services Business reported sales gains of 9% yty. Contributions from acquisitions and foreign currency were 3%, and 7%, respectively. Organic sales growth declined by $3MM, or 1%, as steel production at some sites declined more than the 4% average decline for US steel production overall. Higher maintenance costs also impacted earnings. Operating income decreased by about 8%, and operating margins decreased by 160 basis points to about 9.2%. Results for this Group are expected to improve in the second half. Steel production is expected to increase by 6.8% yty in 2008, according to a CIBC analyst report.

For the Corporation overall, the company sees continued strength in the majority of its end-markets and positive global economic conditions in the second half and into 2008. Performance should again be led by Access Services; with Minerals & RR technologies expected to outperform last year’s second half. Thus, the company expects a 22% yty increase in Q4 earnings, using 67cents as a mid-point estimate. Eps guidance was increased to a range of $2.93-$2.97 for the year 2007.

Praxair (PX)
Although gas volume moderated somewhat in the US, demand for industrial gases worldwide continues strong. Sales, at $2.73Bil were up 13% yty, with currency and selling prices each comprising 4% of that gain, with significant new business from the energy sector and continued gains in Asia and South America. Praxair continues to post positive yty quarterly comparisons. Operating Profit was up 22% yty, before extraordinary gains in the ’06 quarter, raising the margin to 19.5%. Net income was 94cents/sh, a yty gain of 25%.

In North America sales advanced 11% yty to $1.3Bil ex. gas passthroughs, which reduced sales by 1%. Price and acquisitions each contributed 4%. Volume was up 2% with natural gas and currency offsetting each other at 1%. Merchant sales advanced 10% yty. Overall sales for on-site gases were up 9% yty. Packaged gas sales were up 12%. The acquisition of Linde’s Mexican gas operations added 4% to sales. The Aerospace Industry is experiencing a boom and Surface Technologies is benefiting. Sales were up 12% in the quarter yty ex. currency. Operating profit increased 50% yty and margins at 18.2% improved from 17.6% in the second quarter, but were down from 20.2% in the prior year.

South America saw a 23% yty gain (ex. Equipment sales down 2%). Contributions were: Volume 9%, FX 10% & Price 6%. Economies in this region have improved, with Brazil becoming a real export power. Sales in Asia/Pacific were up 15% yty (Volume 10%, FX added 6%, and selling prices reduced sales by 1%). Merchant pricing in China is still very competitive. Consistent with the region’s broad economic recovery, demand in Europe is still strong, although quarterly comparisons are moderating. Sales were up 11% yty in the quarter, selling price increases and volume each added 2% to sales growth. Currency translation added 7% to sales growth. Pricing is advancing to offset cost pressures and operating margins improved due to gains in productivity.

The outlook for the remainder of 2007 is quite positive worldwide, as there is strong momentum in energy, non-residential construction and capital markets. The company expects double-digit sales and higher operating margins in Q4. Earnings should be in the range of 95 – 97 cents/sh. in Q4, and has increased its eps guidance to $3.60 for the year. This represents a yty gain of 20%. Capital expenditures should again be about $1.3Bil, and since 70% the projects involved have take-or-pay contracts, incremental sales growth of some 3-4% should be realized. The project backlog is at 41 and proposal activity is at a high level. While sales growth may be somewhat slower in 2008, operating income should advance in the 15% range yty. Cash flow is strong and higher dividends and share buy backs will add to overall shareholder returns.

Chart Industries
Chart Industries had not reported as CryoGas International went to press for December.

Fred H. Siemer, CFA, is President of Siemer Management Co. and has over 25 years of experience in the Chemical and Investment Industries. He established “Chemical Research for Wall St.” in 1985. He can be reached via e-mail at FHSChem1@aol.com.

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