The Global Market for Water Treatment Products
Deneen, Michael A., Gross, Andrew C., Business Economics
The global demand for water treatment products should rise at 6.6 percent per year between 2002 and 2007 and reach almost $35 billion by the end of that period. China will record the highest rate of growth among major markets with a 17 percent annual rise through 2007. Gains in the developing world will reflect ongoing efforts to deliver safe drinking water to the more than one billion people who currently lack access. The most promising markets are those in the Pacific Rim and Latin America. Gains in highly industrialized countries will be governed by stricter laws and regulations, increased recycling in manufacturing, and the desire for advanced filtration and disinfection. As for major end use sectors or applications, the industrial and energy markets will overshadow the more stable municipal markets. Nonchemical water treatment products are projected to register faster growth than water treatment chemicals, but the two categories are often complementary rather than competitive in various applications. The industry making this wide variety of goods is highly fragmented, since there are hundreds of product vendors and suppliers. The three top producers--Veolia Environnement (France), General Electric (U.S.), and Nalco (U.S.)--together account for only one quarter of total shipments. Smaller firms can compete with narrow product lines that focus on niche markets.
Key External Variables and Trends
The demand for water treatment products is generally linked to the overall health of a national or regional economy. Robust economic growth implies heightened manufacturing activity and energy use; these in turn boost demand for water treatment products. Population growth and demographic shifts also have an important influence on the demand for water pollution control goods, though the impact is weaker as it takes time to build infrastructure. Environmental laws and regulatory edicts mean mandates that affect both water and wastewater treatment; but it is the enlightened action of users, conservation trends, performance standards, and the actual enforcement of government rules that bring about higher demand for water treatment products.
Demographics and Economics
Increases in population and formation of new households generate demand for more potable water. Urbanization and migration patterns also affect the situation by putting added pressure on existing water distribution systems. We estimate that world population will grow from 5.8 billion people in 1997 to 6.6 billion in 2007, while urban population will rise from 2.7 billion to 3.3 billion during the same period. The shift from rural to urban areas, especially strong in Africa and Asia, means that investments must be made in at least a minimum level of housing and associated infrastructure in these regions. All public and private structures require at least an elementary water and wastewater network.
In plotting data on a country-by-country basis, we found a strong, positive correlation between manufacturing value added per capita and water treatment per capita. Countries with higher levels of manufacturing output and energy usage, such as Germany, France, and Japan, use substantial amounts of water treatment products. (Of course, they also have stricter environmental standards.) Developing countries, such as Brazil, India, and China, with less developed infrastructures, are less intensive users of such products. These countries, however, are industrializing rapidly and thus are likely to show faster growth in demand for water treatment goods in the future. Manufacturing sectors in developing countries that are major users include food and beverage, tobacco, electronics, and pulp and paperboard. Energy generation--especially the electric power sector--is also a leading end user.
Table 1 shows the worldwide demand for water treatment. To put the water treatment figures into context although they are in current dollars, manufacturing value added in 1998 dollars stood at $7,900 billion or 20. …