Industrial Gases Distribution
There are three basic distribution methods for industrial gases: (1) on-site or
tonnage; (2) merchant liquid; and (3) packaged or cylinder gases. These distribution
methods are often integrated, with products from all three supply modes coming
from the same plant. The method of supply is generally determined by the lowest
cost means of meeting the customer’s needs, depending upon factors such as volume
requirements, purity, pattern of usage, and the form in which the product is used
(as a gas or as a cryogenic liquid).
On-site. Customers that require the largest volumes of product (typically oxygen,
nitrogen and hydrogen) and that have a relatively constant demand pattern are
supplied by cryogenic and process gas on-site plants. Praxair constructs plants
on or adjacent to these customers’ sites and supplies the product directly to
customers. Because these are usually dedicated plants, the product supply contracts
generally are total requirement contracts, typically having 10-20 year terms
and containing minimum purchase requirements and price escalation provisions.
Many of the cryogenic on-site plants also produce liquid products for the merchant
market. New advanced air separation processes allow on-site delivery to customers
with smaller volume requirements. Customers using these systems usually enter
into requirement contracts with terms typically ranging from 5-15 years.
Merchant. The merchant business is generally associated with distributable
liquid oxygen, nitrogen, argon, carbon dioxide, hydrogen and helium. The deliveries
generally are made from Praxair’s plants by tanker trucks to storage containers
owned or leased and maintained by Praxair or the customer at the customer’s
site. Due to distribution cost, merchant oxygen and nitrogen generally have
a relatively small distribution radius from the plants at which they are produced.
Merchant argon, hydrogen and helium can be shipped much longer distances. The
agreements used in the merchant business are usually three to five year requirement
contracts, except for carbon dioxide, which typically has one-year requirement
contracts in the United States.
Packaged Gases. Customers requiring small volumes are supplied products in
metal containers called cylinders, under medium to high pressure. Packaged gases
include atmospheric gases, carbon dioxide, hydrogen, helium and acetylene. Praxair
also produces and distributes in cylinders a wide range of specialty gases and
mixtures. Cylinders may be delivered to the customer’s site or picked up by
the customer at a packaging facility or retail store. Packaged gases are generally
sold by purchase orders.
A substantial amount of the cylinder gases sold in the United States is distributed
by independent distributors that buy merchant gases in liquid form and repackage
the products in their facilities. These businesses also distribute welding equipment
purchased from manufacturers of such products. Over time, Praxair has acquired
several independent industrial gases and welding products distributors at various
locations in the United States and continues to sell merchant gases to other
independent distributors. Between its own distribution business, joint ventures
and sales to independent distributors, Praxair is represented in 42 states,
the District of Columbia and Puerto Rico.
Surface Technologies
Praxair’s surface technologies segment supplies wear-resistant and high-temperature
corrosion-resistant metallic and ceramic coatings and powders to the aircraft,
printing, textile, plastics, primary metals, petrochemical, and other industries.
It also provides aircraft engine and airframe component overhaul services, and
manufactures a complete line of electric arc, plasma, and high velocity oxygen
fuel spray equipment as well as arc and flame wire equipment used for the application
of wear resistant coatings. The coatings extend wear life and are applied at
Praxair’s facilities using a variety of thermal spray coatings processes. The
coated parts are finished to the customer’s precise specifications before shipment.