2017 Water and Wastewater Treatment Chemicals Purchases Will Exceed $27 Billion

Next year the purchases of water and wastewater treatment chemicals will exceed $27 billon.  This represents the final price to the end user.  Much of the revenue sticks with the companies who mix commodity chemicals to provide custom treatment.   Ecolab and GE Betz are examples of the companies with the expertise to recommend the right chemical blend and then to furnish it.  Much of the value is generated by the process knowledge of the supplier.

Water and Wastewater Treatment Chemicals Purchases Top of Form

($ Millions)

Industry         2017

Municipal wastewater treatment represents the largest single industry segment.  The problems with lead contaminated water in Flint, Michigan underscore the importance of treatment chemicals for this application.

The power industry is the second largest purchaser.  Coal-fired power plants in China will spend over $1 billion for treatment chemicals in 2017.  There are many supercritical and ultra-supercritical boilers in operation in the country.  High quality treatment chemicals are needed to keep them operating.

Wastewater is a steady growth industry as developing countries are installing secondary treatment systems and need to purify the discharged wastewater as well as to dewater sludge.

The oil and gas industry must treat water from various sources including the produced water which is extracted along with oil.  The lack of new drilling sites is encouraging water treatment since there are fewer options for reintroduction of the water which is already being produced.

For more information on Water and Wastewater Treatment Chemicals World Market, click on:
http://home.mcilvainecompany.com/index.php/markets/27-water/449-n026-water-and-wastewater-treatment-chemicals   

The Impact of Non-Traditional Needs and Solutions on Pump Industry Profitability

Investors are attracted to pump companies because of the large size of the pump market and the fact that their products are needed in growing industries such as water treatment.   Investment analysts do a good job of predicting the profitability of the segments of the market dealing with traditional needs and traditional solutions but have difficulty anticipating the impact of non-traditional needs and solutions.   The future in the case of non-traditional needs and solutions will not be an extension of the past.

We are now at the bottom of a pump industry cycle.  The fortunes of the companies focusing on traditional solutions tend to look brighter than the fortunes of those who rely in part on non-traditional solutions.  If we look out five years, we need to take into account four scenarios.

The traditional needs are exemplified by the municipal wastewater industry.  Processes are slow to change.  Because of the nature of the bidding process, traditional solutions are encouraged.  An oil and gas floating platform lends itself to unique solutions.  A pump requiring less maintenance is valued more highly when the service engineer has to make a boat trip to make repairs.   The high pressures and unique conditions to which subsea pumps are exposed dictates new solutions.  The development of pumps for energy recovery in desalination reverse osmosis (RO) plants is one of many examples where a need was created by a technical development.

As the pump industry rebounds, there will be many opportunities for market leadership and development of new products and services.  Analysts should take this into account in their assessment of various pump companies. 

Xylem and Flowserve are two of the four leading pump companies in the world.  They have different markets and strategies.

Xylem exemplifies a large supplier targeting superior traditional solutions.  It is focused on industries with slow but steady growth.  It is the world’s fourth largest supplier with pump revenues of $2.1 billion.   Total revenue in 2015 was $3.65 billion which was down $200 million from an average of the previous two years.  Despite lower sales, the operating margin was up from 11.8 percent in 2013 to 12.9 percent in 2015. On the other hand, R&D dropped $10 million to $95 million and represented 2.6 percent of sales in 2015.

The 2015 revenue split was 44 percent industrial, 33 percent public utility, 21percent residential and commercial and 2 percent agricultural.  Transport generated 41percent of the revenues and building services 21 percent.  The pump or transport activities are complemented by treatment and test products. More than 40 percent of revenues come from repair and services.  Most of the industrial revenues come from transport of water. For example, a power plant extracts river water in the same quantities and manner as does a water utility.

Due to the fact that many of the customers are public utilities, there is an inherent resistance to change and a focus on initial price rather than total cost of ownership.  Forty-one percent of the present revenues are in the U.S. compared to only 13 percent in the Asia/Pacific region.  Application of superior traditional solutions leveraged by the U.S. experience offers substantial growth opportunities in Asia/Pacific.

Flowserve has a business model which lends itself to capitalize on “new needs.”  It focuses on cyclical markets but ones with long-term positive drivers.  2015 sales were $4.6 billion.   Oil and gas accounts for 36 percent of sales whereas “water” accounts for only 4 percent.  Thirty percent of Flowserve’s revenues come from engineered pumps, seals, and systems. Flowserve and Xylem have not competed with each other since the Xylem/ITT split which resulted in the industrial pump activity remaining with ITT. 

The cycle magnitude has been reduced by the change in mix of orders.  Traditionally new large projects accounted for 20 percent of sales. Now it is between 10 and 15 percent.  Short-term smaller projects such as replacement and upgrading now account for more than 40 percent of sales. The aftermarket segment now represents more than 40 percent of sales.  The big drop in sales to the oil and gas industry has reduced earnings but cost reductions have partially offset the revenue losses.

The challenge for Flowserve and similar companies is to minimize profit reductions in the low end of the cycle and maximize opportunities at the high end.  Manufacturing migration is one of the steps the company is taking as it right sizes its assets to deal with geographic market conditions.

Another challenge is to leverage the “engineered solutions” to provide products with lower total cost of ownership.  Life of pump parts in applications such as fracking is measured in months.  So there are major opportunities to differentiate themselves with superior materials and designs.

The McIlvaine Company analyzes the traditional and non-traditional pump needs and its impact on the industry in pumps.  For more information on N019 Pumps World Market click on:  http://home.mcilvainecompany.com/index.php/markets/2-uncategorised/116-n019.

Petrochemicals Is a Growth Market for Flow Control and Treatment

2017 will be a good year for those flow control and treatment companies selling into the petrochemical industry in East Asia.  Production for this region will exceed 45 percent of the world total.  There has been growth in the NAFTA region due to the availability of low cost natural gas, but it does not match the growth in China.

The investment in flow control and treatment in East Asia will be more than 60 percent of the total because of the feedstock source.  A large portion of the Chinese petrochemicals will be derived from coal-based feedstocks rather than natural gas.  The gasified coal must be filtered to eliminate ash. The acid gases also need to be removed before they even reach the conventional gas-to-petrochemicals process.  Coal also contains unacceptable levels of mercury which require carbon beds or ionic impregnated bead beds for removal.  Dehydration requires molecular sieves.  Generally, three molecular sieve units are needed to allow for regeneration.  The molecular sieve switching valve is expensive due to the temperature and corrosion exposure as well as the zeolite particles.

The large quantities of H₂S generated in the coal gasification process require conversion to sulfur or sulfuric acid.  Scrubbers, pumps and valves are all needed for this process.

The forecasts for flow control and treatment in the petrochemical industry is addressed in N049 Oil, Gas, Shale and Refining Markets and Projects.

Individual product forecasts for the petrochemical sector are found in:

N008 Scrubber/Adsorber/Biofilter World Markets

N019 Pumps World Market

N028 Industrial Valves: World Market

N021 World Fabric Filter and Element Market     

Utility E-Alert Tracks Billions of Dollars of New Coal-fired Power Plants on a Weekly Basis

Here are some headlines from the Utility E-Alert.

UTILITY E-ALERT

#1268 – April 15, 2016

COAL – US

• Peabody Energy files for Bankruptcy
• Clyde Bergemann Power Group receives Order for ELG & CCR related Ash Handling Systems for a Major Utility in South Carolina
• Second SCR at Hayden to be completed in 2016

COAL – WORLD

• B&W awarded $80 Million Contract to Supply Boiler to Philippines Power Plant

§  Natural Draft Cooling Tower Order for 450 MW Turow awarded to Hamon

• 600 MW Coal Gasification Power Plant possible in South Australia

§  China's Harbin and Saudi ACWA near Loan for Dubai Clean Coal Power Plant

§  EPTL’s Power Plant Project

The 41F Utility E-Alert is issued weekly and covers the coal-fired projects, regulations and other information important to the suppliers. It is $950/yr. but is included in the $3020 42EI Utility Tracking System which has data on every plant and project plus networking directories and many other features.

 McIlvaine Hot Topic Hours (HTH) and Recordings

     Explanation          Applicable Services         Schedule & Registration       Sponsored Webinars 

McIlvaine conducts periodic webinars which are in a discussion format and are free of charge to all participants. The displayed material and recordings are free to purchasers of the products and services and by subscription to others.

Format:  50-90 minute recorded discussion using McIlvaine display material. The session will be free of charge to all participants but registration is required.

Approach: There are two types of webinars. One is focused on Markets and directed to suppliers. The other is focused on aiding purchasers make the best Decisions relative to purchases of flow control and treatment equipment and services.

Markets HTH
The general overviews of the market including size and major variables will be discussed with heavy emphasis on technology and regulatory drivers.  The presentation will be based on the latest information appearing in McIlvaine multi-client reports. Questions and views from both subscribers and non-subscribers are encouraged.

Decisions HTH
McIlvaine has been publishing information systems on pollution control since 1974.  Each subject is organized by the pollutant control technology e.g. fabric filter, scrubber, etc. There are search capabilities to retrieve information on any application.  The newest addition has been slide deck systems displaying the issues and options relative to a specific applications.  Coal-fired power, cement, steel and waste combustion decision slide decks are continually updated.

The continually updated slide decks are displayed on the applicable decision system.  It is recommended that participants view the slide deck in advance of the session and be prepared with questions and views.

Value to purchasers and specifiers:  Your questions and interests will be prioritized in the discussion. You will get a monthly newsletter and have continuing access to the system and multiple ways to interface in the future along with a networking directory of suppliers.

Value to Suppliers:  You have the opportunity to provide data to be considered at no charge. If you are also a subscriber you will see the summaries in advance and be able to shed light on issues and options not properly covered in the slide deck.  If you are a subscriber you will receive the monthly newsletter and continuing yearly access to the system including networking directories.

44I Power Plant Air Quality Decisions  includes 1ABC, 3ABC, 4ABC, 9ABC decision services but not 2ABC. So those with multiple technologies and at least partial focus on power will find this combination most cost effective.

HOT TOPIC HOUR (HTH) SCHEDULE

Dates for the next 6 meetings are firm; the others will be held in sequence at approximately two week intervals.  Unforeseen developments could dictate the insertion of new subjects.

Click here to Register for the Webinars

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Bob McIlvaine
President
847-784-0012 ext 112
rmcilvaine@mcilvainecompany.com
www.mcilvainecompany.com