Water Market Insights No

Water Market Insights
No. 5 May 25, 2012

WELCOME

The following insights can be sent to you periodically. This alert contains the details on the upcoming hot topic hour and breaking news. This is one of a number of free services. You can sign up for any of these newsletters and of course request to be removed from the mailing list at any time. See registration following the newsletter.

· U.S. Industrial Air Emitters to Spend $1 Billion/yr for Air Pollution Control Over the Next Five Years on More than 2000 Specific Projects

The market for cartridges utilized to purify liquids will grow to over $16 billion next year. This is the new forecast in Cartridge Filters: World Markets, an online report by the McIlvaine Company. (www.mcilvainecompany.com)

Chemical	715
Commercial - Point of Entry	913
Commercial - Point of Use	2,554
Electronics	502
Food	552
Healthcare	1,330
Metals	196
Oil & Gas	333
Other Industries	663
Pharmaceutical	2,201
Power	244
Residential - Point of Entry	826
Residential - Point of Use	4,132
Wastewater	273
Water	772
Total	16,206

This forecast does not include cartridges used in mobile devices such as automobiles. It does not include cartridges used with compressed gas or hydraulic fluids. No air purification applications are included.

Cartridges come in a variety of sizes, materials and performance parameters. Membrane cartridges can remove sub-micron materials. Carbon black cartridges are efficient in removing contaminants affecting taste. Metal cartridges are capable of operating at high temperatures.

The largest single user segment is the home owner. Cartridges may filter out sediment at the point of entry, under the sink, in the ice making system, or at the top of the pitcher. The poor quality of drinking water in many countries of the world has resulted in substantial investment by home owners to insure water safety. The pool and spa market is substantial.

The pharmaceutical industry uses disposable cartridges for process separation. This allows switching from one product to another without cross contamination worries. In the power industry, cartridges are less popular than filters which are continuously cleaned. In the electronics industry, cartridges are used as pre-filters for reverse osmosis systems.

Due to the pharmaceutical activity in the U.S. and Germany, these two countries are among the leading purchasers of cartridges. However, China is a much bigger purchaser than Germany in all applications outside of the pharmaceutical segment. As a result, it’s projected $1.5 billion in cartridge purchases in 2013 are more than twice that projected for Germany.

Fossil and nuclear power plants will invest $736 billion on new equipment and repair parts in 2013. Sixty-five percent of the investment will be in coal-fired power plants. This is the latest finding in Fossil & Nuclear Power Generation: World Analysis & Forecast, published by the McIlvaine Company. (wwwmcilvaine@mcilvainecompany.com)

Despite the virtual moratorium on new coal-fired power plants in the U.S., the rest of the world will spend $256 billion on new coal-fired power plants in 2013. This contrasts with only $60 billion for gas turbine systems. Repair parts and upgrades of existing coal-fired power plants will generate revenues greater than the combined new power plant and repair investments by nuclear and gas turbine combined.

The future competition among these three major fuels will be shaped by a number of factors. The greatest variable is the quantity of shale gas which can be economically produced. The U.S. has potentially enough shale gas to meet present requirements for thirty years. China has even greater reserves but they are located deeper and will be more expensive to extract. Furthermore, the Chinese shale gas industry is in its infancy. Even with its most ambitious plan, China’s gas production would only be eight percent of that in the U.S. in 2020.

The efforts to reduce greenhouse gases will virtually eliminate new coal-fired power plants as an option in certain countries but the large investment in these power plants by other countries will result in coal-fired power continuing to be the most popular option.

Nuclear generation growth will also be highly regionalized. Some countries will not only avoid building new nuclear power plants but will phase out existing ones. Other countries will be big investors in nuclear power. Nevertheless, this fuel option will continue to remain in third place far behind coal.

For suppliers of products and services for the air, water and energy industries there are some substantial double-digit growth opportunities. Ten of these have been identified as the most promising by the McIlvaine Company These are ranked based on potential market size.

There is a very large continuing investment in extraction of gas from shale in the U.S. The requirement for hydraulic fracturing two miles underground greatly increases the investment in flow control and treatment products: the U.S. now has access to reserves which could make it a net exporter or at least self sufficient for 30 years. The big unknown is the potential in China and the rest of the world.

China has bigger reserves but they are deeper. There is also a lack of water in the areas where it will be required. Nevertheless, China plans 60 billion m³ of capacity by 2020.

$70 billion will be required to supply 70,000 ships with treatment systems to ensure that ballast water discharges be free of live invasive species. Large investments will also be needed to reduce sulfur and NO_x emissions from the ship stacks.

Power plants and other large water users will accelerate the treatment and use of wastewater. The co-location of municipal wastewater treatment plants and either combined cycle gas turbine or coal-fired power plants will be a popular option. Industrial facilities will increasingly opt to treat and reuse wastewater rather than discharge it. The investment in treatment systems and chemicals for this purpose will be substantial.

Coal-fired power plant operators in China are embarked on a huge program to install DeNO_x systems using selective catalytic reduction. In Europe and the U.S., regulations requiring NO_x reduction on trucks and other vehicles will ensure double-digit growth in this segment. Suppliers of urea and ammonia will benefit from both the stationary and mobile activity.

The new generation involving recirculating tanks and efficient filtration is changing the approach to fish farming. The continuing depletion of wild fish populations is also a driving factor.

The average age of coal-fired power plants in the U.S. is forty years. The efforts to prevent new power plant construction in the U.S. and Europe are forcing operators of existing power plants to modernize. One of the biggest needs is to replace outdated instrumentation and controls and to make the power plants much more efficient.

The remediation of soil and groundwater is becoming a big business in developing countries. It will generate $36 billion in revenue this year.

Small particles are increasingly identified as the most harmful contaminants in air. The resultant legislation will continue to bolster both the mobile and stack gas markets for reduction technology. Fabric filters will replace electrostatic precipitators in many cement and power plants.

Waste-to-energy through combustion of solid wastes or generation of biogas will replace landfill as a disposal method in developing countries. The U.S. is one of the few developed countries which tolerate landfills as a solution.

The short-term outlook for wind and solar has been negatively impacted by the shale gas discoveries and production. Cut throat pricing and oversupply have battered the solar cell manufacturers. Nevertheless, the “renewables” market will weather the storm and again become healthy.

Information on the above opportunities is contained in a number of McIlvaine market research reports. For more information, click on: www.mcilvaine@mcilvainecompany.com.

U.S. Industrial Air Emitters to Spend $1 Billion/yr for Air Pollution Control Over the Next Five Years on More than 2000 Specific Projects

Operators of industrial boilers, kilns, pulp mills, mines and incinerators are facing huge investments to meet recently passed national regulations and imminent additional regulations by the individual states. The expenditure will exceed $1 billion/yr over the next five years as thousands of projects ranging from $100,000 to $25 million will be undertaken. These projects are identified in the McIlvaine report, U.S. Industrial Emitters. This database covers over 40,000 industrial sources in the U.S.

Three major national rules have been promulgated. They deal with air toxics and affect the cement industry, operators of industrial and commercial boilers, and operators of solid and liquid waste incinerators. There will be extensive investment in fabric filters to capture the toxic metals. In many cases, activated carbon or other chemicals will also be needed to capture mercury. Removal of hydrogen chloride will also be necessary and will generate markets for wet scrubbers. Organics such as the kerogens in limestone used in the cement industry also generate organic toxics and will create a market for thermal treatment technologies.

Several thousand plants will be installing new air pollution control systems but nearly 6,000 plants will be making investments in monitoring and control of process and combustion operations. Mercury and PM mass monitors are very expensive but will only be required for 1000 plants. However monitors for CO, and O₂ will be required at many plants.

It is likely that rules will be promulgated by individual states which will force the addition of NO_x, SO_x and particulate matter reduction equipment. This is in addition to that required by the national standards. The states are required to take whatever actions are necessary to bring the ambient air quality to a level specified in federal regulations already promulgated. It will be more cost effective and politically acceptable to require larger industrial facilities to cut their emissions by fifty percent then it will be to impose limitations on lawn mowers, grills and the like.

Even though many areas are in attainment with ambient standards, they are upwind of areas which are in non-attainment. These attainment areas will be subject to lawsuits by the downwind areas. The end result is that equipment will be required at many locations and not just within the non-attainment areas.

The discovery of large quantities of shale gas and the resultant low price of natural gas will ensure the stability and even modest growth in the U.S. industrial base. As a result, the vast majority of plants will make the necessary expenditures to remain in business.

Technology	Units	Coal-fired		Nuclear		Gas Turbine
		Existing	New	Existing	New	Existing	New
Capacity	GW	2228	128	439	16	1000	67
Total Investment	$ Billions	223	256	88	64	45	60
Combined New and Existing	$ Billions	479		152		105

U.S. Total	25
Marcellus U.S.	13
Argentina	22
Europe	18
China	36
U.S. Total Natural Gas Consumption in 2011	0.8
U.S. 2011 Electric Power Consumption with Gas	0.2