Absolute Air set to break ground on new plant, unconcerned about rival ASUs

gasworld article, August 2019 by Nick Parkinson

It is not just the five distributors which make up Absolute Air that are eager to see the project succeed. Other distributors are also watching with interest the progress of a new air separation unit (ASU) in the Minneapolis area, which is due to have its groundbreaking ceremony soon and is expected to be onstream late next year.

Ned Pontious, President of Absolute Air, LLC, believes there is potential for US distributors in other geographical areas to set up their own ASU for a gas supply independent of the major industrial gas companies.

“At the GAWDA meeting [Spring Management Conference] in Minneapolis recently, it was kind of talk of the town,” Pontious told gasworld.

“Everybody was talking about it. The majors are doing their thing but ourstrategy is to continue independence and be independent of their gas supply. There are a lot of independents that want to see it happen because there are other pockets of the country I think where this could apply as well. I’ve had interest in similar projects elsewhere, I can think of two different parts of the country where people have specifically told me when you get this going and moving along we want to talk to you. A lot of people want to see it happen and not just talk about it, so it’s kind of exciting.”

It is especially exciting for the partnership of five independent gas and welding supply distributors, plus the Independent Welding Distributors Cooperative (IWDC), involved in the ASU at Faribault, Minnesota, which will supply nitrogen, oxygen and argon to serve customers in the upper Midwest area in customer applications such as metal fabrication, blanketing, purging, combustion, chilling and freezing.

“It’s about a two-year project, we’ll make our first drop of liquid in December 2020,” Brad Peterson, Mississippi Welders Supply (MWS) President and GAWDA President, told gasworld at the SMC.

“Right now, we’re in the heavy design and engineering phase. Very soon we will break ground, and we need to get the building built by September, October so we can work inside the building on the process stuff during the winter next year.”

MWS, Toll Gas & Welding Supply, Minneapolis Oxygen, A-OX Welding Supply, and Huber Supply make up Absolute Air and together represent 30 business locations with over 50,000 customers in a seven-state region.

Experience

Pontious, who retired as Norco President in February 2018 after nearly 20 years at the helm, has prior experience of setting up two ASUs for Northwest-based Norco in 2002 and 2009.

“When I was running Norco it was a little different,” Pontious said.

“Geographically we didn’t have very many plants that were close to us so it was a natural thing for us to build those two plants. Now there’s not very many geographical areas where it’s obvious they should put a plant in because they are a strong independent. Norco is the strongest and largest independent in the country but there are some areas that are very strategic to supply gases to some of the majors. For example, one of the majors that is not building a plant in Minneapolis, was like we’ve needed product in that area for a long time and could never justify building our own plant, but it may make sense to buy some product from Absolute Air. So, we have got those discussions going on and I think there are other areas in the country where other majors want to fill in their map and maybe can’t justify the capital themselves but if someone else would do it they would consider picking up product.”

“It’s 300 ton per day plant, so it’s not world scale but it’s also not a small plant and it’s big enough to allow us to do some product swaps and trade.”

Not even the presence of two other majors, plus an existing Praxair ASU in the Twin Cities region, is dampening Absolute Air’s optimism. Earlier this year, Airgas, an Air Liquide company, was been given the go-ahead to start construction on a 17,000 square feet ASU in Cottage Grove, ten miles south of Saint Paul, and about 20 miles south of Minneapolis city center. Construction at the Airgas ASU was reportedly expected this year, and to be onstream in 2020. Air Products expect their ASU in the Twin Cities area to also be onstream in 2020 and “will provide reliable liquid industrial gas options for local customers and distributors in the region”.

“For 40 years there has been one plant, Praxair, in this area,” Peterson said.

“Within the span of three weeks three companies announced they are going to build a plant so that confirms our independent analysis that there needed to be another plant here.”

“I don’t think our independent analysis indicated two other plants were also being built though. It would have been better had it been us or Praxair but all of us are committed in going ahead and we feel very confident. We have five companies, we’re all equally committed and on a level playing field, sales people are on the ground, contracts are in place, there’s a lot of rolling stock and we are feeling really good about our plant. We sized our plant to meet our current needs plus our growth, plus some market share that we hope to take, plus some for swap deals. We are not building a small plant.”

Greater independence

Absolute Air sees the ASU as a means to assure an ongoing and more economical supply of oxygen, nitrogen and argon against the backdrop of continuing consolidation of international industrial gas producers. For Toll President Chuck Allard, one of the biggest appealing factors to being involved with Absolute Air was the independence he hopes it will give the partners.

“One of main priorities is to be as independent as we possibly can, to be able to produce the capabilities we need to be independent, not be reliant on other vendors,” Allard told gasworld.

“You can control your lead times, you can control your quality of products and you can control your pricing.”

“We’re well along in the process, most of the engineering has been done, most of the long lead time equipment is on order, we’ve just finalized working through the city process for our city approval for building the property. We feel there is the demand for the products.”

Pontious is also not worried by the competition. “I’m not so concerned,” Pontious said. “The Air Liquide [Airgas] plant was no real surprise to us because we expected last summer for them to announce they are going to build a plant. They had to shut down a large plant in Wisconsin because it was old and Air Liquide, since they acquired Airgas, has a strong demand to supply their own internal needs, so they knew they were going to be putting in a big plant, probably bigger than ours and I’m sure it is going to be bigger than ours.”

“The one that kind of caught us off guard a bit was the Air Products plant. Time will tell how big that plant is. If they do put a plant in, everything indicates to us it’s maybe smaller than they initially planned on and it could be because we are building a plant as well, I’m not sure. They have city approval to move ahead but they haven’t broke ground yet so we will see what happens with that one.”

Pontious added, “My biggest message to the industry is I don’t necessarily want to poke the bear and upset the major companies too much by saying we’re going to go head-to-head with them. I just think we need independence and we will work with other majors to help them in their downtime like they will help us in our downtime. They need to understand and respect the fact that we are independent and want to make our own products. It’s exciting.”