Water Market Insights No

· Where Are the High Growth Air and Water Opportunities?” is "Hot Topic Hour" on May10, 2012

Answers to this question will be provided on May 10 in a 90 minute webinar conducted by the McIlvaine Company. The merger of Tyco Flow Control and Pentair coupled with the acquisition of Howden by Colfax indicate the recognition of a $330 billion market which covers the movement of gases (including air) and liquids (including water) as well as their control and treatment.

There are a number of very attractive growth segments which provide opportunities for expansion and acquisition. Here are some of them which will be identified and quantified in the session:

· International shipping including ballast water treatment and stack gas cleanup while burning bunker fuels,

· Sales of equipment to reduce air toxics and to regulate water extraction and discharge to receiving streams and lakes based on U.S. EPA regulations for power plants,

· New approaches to NO_x and odor control of air and disinfection of water including use of chemicals and UV oxidation techniques,

· Potential for innovative technologies created by a more holistic view of opportunities such as co-locating municipal wastewater treatment and power plants,

· The evaluation of China as both a market for products and services and potential breeding ground of international competition,

· Necessity of evaluating all international growth opportunities through the prism of purchasing parity and adjustments for inflation,

· Leveraging various product combinations for highest growth. The advantages of chemicals, filter media and other consumables as opposed to components, instrumentation or systems.

This session is available free of charge to any subscriber to McIlvaine air or water related market reports. It is available at a price of $400 for non-subscribers. However, this payment is deductible from future report purchases.

To register for the Hot Topic Hour on Thursday, May 10 at 10 a.m. (Central time) click on:

On Thursday at 10 a.m. Central time, McIlvaine hosts a 90 minute web meeting on important energy and pollution control subjects. Power webinars are free for subscribers to either Power Plant Air Quality Decisions or Utility Environmental Upgrade Tracking System. The cost is $125.00 for non-subscribers. Market Intelligence webinars are free to McIlvaine market report subscribers and are $400.00 for non-subscribers.

DATE	Non-Subscribers Cost	SUBJECT	Webinar Type
April 26, 2012	$125.00	Particulate and Condensable Removal	Power
May 3 and 4,2012	$125.00	Flyash Pond and Wastewater Treatment Issues	Power
May 10, 2012	$400.00	$330 Billion Market for Air/Gas/Water/Liquid/Flow and Treatment (high growth segments plus regulatory, technology, application, and market drivers)	Market Intelligence
May 17, 2012	$125.00	Role of Renewable Energy in U.S. and World	Power
May 24, 2012	$125.00	Status of Carbon Capture Programs and Technology	Power
May 31, 2012	$400.00	Air Pollution Control Markets (geographic trends, regulatory developments, competition, technology developments)	Market Intelligence
June 7, 2012	$125.00	Dry Sorbent Injection and Material Handling in Coal-fired Power Plants Plants	Power
June 14, 2012	$125.00	Report from Power Gen Europe (update on regulations, speaker and exhibitor highlights)	Power
June 21, 2012	$400.00	Pumps and Valves (impacts of mergers, new markets, market drivers, forecasts)	Market Intelligence
June 28, 2012	$125.00	Greenhouse Gas Strategies for Coal-fired Plant Operators	Power
July 12, 2012	$125.00	CFB Technology and Clean Coal (Update on CFB Reactor Technology)	Power
July 19, 2012	$400.00	Future for Coal, Gas, Nuclear and Renewables (forecasts by region and discussion of market drivers and regulatory constraints)	Market Intelligence
July 26, 2012	$125.00	Beneficial Byproducts of Coal Combustion and Gasification	Power
August 2, 2012	$125.00	Mercury Control and Removal Status and Cost	Power
August 9, 2012	$400.00	Filter Media (forecasts and market drivers for media used in air, gas, liquid, fluid applications both mobile and stationary)	Market Intelligence
August 16, 2012	$125.00	Report from Coal-gen (highlights of speeches and exhibitions)	Power
August 23, 2012	$125.00	Report from Mega Symposium (highlights of speeches and exhibitions at this important air pollution conference)	Power
August 30, 2012	$400.00	Instrumentation for Air, Gas, Water, Liquids (forecasts , market shares, growth segments)

Sales of industrial pumps in Asia will be close to $16 billion this year according to the newly updated online Pumps World Markets published by the McIlvaine Company. (www.mcilvainecompany.com)

Asia will account for more than 40 percent of worldwide purchases on a purchasing parity basis. However, the prices for a pump of a given quality in China are about 65 percent of an equivalent pump in the U.S., Japan or Europe. Therefore, for international pump companies who are converting Asian profits into U.S. dollars, Asia represents only 30 percent of the world market potential in 2012.

There is a wide spread between the price differentials depending on the pump quality and the ability of local Asian companies to compete with international firms. API 674 pumps are sold at close to international pricing levels, whereas, low performance water pumps are sold at prices as low as 40 percent of the world average. Chinese manufacturers are expanding into the design and supply of some of the largest and most rugged pumps. One example is the flue gas desulfurization recycle slurry pumps. These pumps move 50,000 gpm of abrasive gypsum slurry. Only a few international suppliers have been able to deliver these pumps, but now there is Chinese competition.

Municipal water and wastewater will account for 37 percent of the pump purchases. The large infrastructure program in the region will continue for the foreseeable future. The lack of adequate water supplies results in substantial increases in pump investments for transport of water to arid areas. The high levels of pollution in the water supply also will result in increased purchases of pumps for the treatment systems.

Power is the next largest segment. China continues to build large numbers of coal-fired power plants. Vietnam, India and Indonesia are also expanding coal-fired electricity generation. The nuclear disaster in Japan is resulting in additional pump purchases as alternative energy sources are utilized.

Prices of equipment, services and consumables utilized in air and water pollution control have risen 9 percent in the two years starting with the spring of 2010. This is a world average and varies considerably in individual countries.

Typically, market forecasts (McIlvaine is no exception) are based on the value of the dollar as of a certain year. If the user of the report wants to determine the revenue forecast in actual dollars for a current or future year, he must add in an inflation factor. McIlvaine uses a base year of 2010. On a world basis, 2011 revenues have to be multiplied by 1.05 and projected 2012 revenues have to be multiplied by 1.05 x 1.04 or 1.09 to convert revenue forecasts to current dollars.

The prices for environmental equipment and services are up about two percentage points above general inflation which has been 7 percent worldwide in the two year period.

Inflation rates vary considerably from country to country. They range from 10 percent in Turkey to 1 percent in Sweden.

In general, the price hikes are large and do not take place yearly but in reaction to changes in material and energy costs. Here are some examples:

Company	Product	% Increase	Month	Year
Bonney Forge	Cast Steel valves	6.5	6	11
A.Y McDonald	Submersible turbine pumps	5	11	11
A.Y McDonald	Dewatering pumps	6	11	11
Sherwood	All valves	4-7	9	11
Kennedy Valve	Fire control valves	7	2	12
Ahlstrom	Filtration media	Up to 12	1	11
Dow	Filtration membranes	Up to 12	1	11
Dow	Ion exchange resins	Up to 10	11	10
Xylem Canada	Water and wastewater products	2.5	6	10
Amway	Air purifier	25	9	11
Amway	Carbon replacement filter	8	9	11

Another requirement is to adjust revenue figures to the pricing in individual countries. Where the market is set by import prices then this is not a requirement. However, when the prices are set by in–country competition, it is necessary to adjust market forecasts to reflect the local pricing. This can be done on an approximate basis by comparing nominal GDP to purchasing power parity GDP.

Country	2011 Purchasing Power Parity : $ Trillions	2011 GDP Nominal - $ Trillions	Ratio
United States	15	15	1
China	11.2	7.3	0.65
India	4.5	1.7	0.37

China has built its manufacturing base to build higher technology products. As a result, local competition sets the pricing for more products than in India which must still import much of the high technology products. Chinese local pricing has risen substantially in recent years and is now at 65 percent of the U.S. level. This is in contrast to India where prices of locally manufactured goods are only 37 percent of the U.S. level.

Details on price increases, inflation and purchasing parity are included in all the McIlvaine air, water and energy market reports. For more information on these reports, click on: www.mcilvainecompany.com.

Expenditures for portable, laboratory and continuous measuring instruments for air and water will exceed $14.1 billion this year. This is the forecast made by McIlvaine in its Air and Water Monitoring publications. (www.mcilvainecompany.com) The definition of the market is based on the McIlvaine concept of “decisive classification” rather than scientific or literal classification. Some process analyzers, software and transmitters are included in the forecast because this is the way many of the suppliers view the market and, most importantly, the segmentation which purchasers use to sort through the alternatives.

Oxygen measurement is one of the largest segments in the air and gas sector. It is used for control and safety in combustion applications. It is also used for inerting systems and gas storage. It is used to determine the quality of CO₂ used in brewing. It is one of a number of parameters measured with air pollution continuous emission monitor systems.

Dissolved oxygen measurements in water are a major water segment with analyzer revenues approaching $200 million/yr. Continuous monitors are needed in beverage, aquaculture and remediation. Accurate pH, O₂, conductivity and turbidity measurements are critical in modern wastewater treatment.

This year $1 billion will be spent for continuous emission monitoring systems for stack gases. It is divided into the following categories:

One of the fastest growing segments is continuous monitors for oil and gas. Water quality instrumentation is needed to monitor aquifers and surface water in proximity to shale gas operations. Gas chromatographs can continuously measure natural gas Btu content, an important parameter in energy transactions.

The total process control and instrumentation market exceeds $70 billion worldwide. The measurement and control of gases and liquid processes is just a small portion of the total, but it is difficult to completely compartmentalize this portion. The oil and gas and chemical sector listed above accounts for more than $15 billion in process instrumentation purchases including the following segments:

Oil, Gas, Refining, Petrochemical, Chemical Process Instrumentation Revenues 2012
Product Category	$ Billions	Air/Water Inclusions
Process Control Systems	4.0	0.2
Control Valves and Actuators	4.2	0.0
Application Software	1.2	0.1
On-Line Process Analyzers	1.6	0.4
Flow, Temperature, Pressure, Level Transmitters	4.0	0.3
Total	15.0	1.0

Only $1 billion out of a total expenditure of $15 billion is included in the McIlvaine air/water forecast.

For more information on McIlvaine Air and Water Monitoring publications, click on:

2012 Projected Inflation Rate
Country	Percent
China	3.6
Germany	2.0
India	7.5
Sweden	1.0
Turkey	10.0
U.S.	2.6

World Air and Water Instrumentation Revenues 2012 ($ Millions)
	Laboratory	Portable and Field, Emergency Response	Online Continuous Plus Software	Ambient- Fence Line, Remediation	Total
Municipal Water/Wastewater, Agricultural, Aquaculture	1,000	500	800	700	3,000
Oil, Gas, Refining, Chemical	300	200	1,000	300	1,800
Mining and Minerals	80	20	500	100	700
Electronics and Pharmaceutical	150	50	280	20	500
Pulp/Paper, Food, Beverage and Miscellaneous Industrial	100	100	300	100	600
Power Including Nuclear, Fossil, Hydro, Renewables	800	400	2,400	400	4,000
Government, Military and Academia	1,000	500	200	300	2,000
Commercial, Including HVAC Cooling, Restaurants, Pools and Spas, Vessels	400	700	400	0	1,500
Total	3,830	2,470	5,880	1,920	14,100

Stack Gas Continuous Emissions Monitor Revenues 2012
Segment	Percent
Power	50
Oil, Gas, Refining, Chemical	20
Municipal Wastewater	5
Mining and Minerals	10
Other	15