While many water treatment chemical companies have just finished a round of cost cutting, the market is on its way back up. In its online continually revised report, Water and Wastewater Chemicals: World Markets, the McIlvaine Company now forecasts treatment chemical sales of $18.3 billion in 2006 up from $16.4 billion this year.
Power accounts for nearly one-third of the total market. This segment has been flat, but is now expanding. The biggest growth will be in China. Chemical sales to Chinese power plants will more than double over the next 10 years. Coal-fired power plants utilize four times the treatment chemicals used by gas turbine plants. China plans additional coal-fired capacity of 300,000 MW, bringing its total to 500,000 MW over the next 15 years. This will create the largest power plant chemicals market in the world. China will also show the highest percentage gains in municipal water and wastewater and in the chemical industry.
Three areas where double-digit growth will occur are metal separation, odor control, and desalination. The U.S. has recently regulated the miscellaneous metal working industry wastewater discharges. This will result in total yearly treatment costs including equipment and chemicals of $2 billion. Municipal wastewater plants throughout the world are accelerating their odor control activities. Prevention of scaling on desalination membranes is a critical factor in turning seawater into drinking water.
Corrosion inhibitors will remain the largest product segment. Worldwide sales will increase from $3.8 billion this year to $4.2 billion in 2006. Organic flocculants will continue as the second largest category with 2003 sales of $2.6 billion rising to $3.2 billion. Scale inhibitors are the third largest segment. In the 2003-2006 period, sales will grow by $300 million to $2.6 billion.
There have been a number of structural changes in the industry including the divestiture of the largest treatment chemicals company. A consortium of private equity firms comprised of The Blackstone Group, Apollo Management, L.P., and Goldman Sachs Capital Partners acquired Ondeo Nalco ("Nalco") from Suez S.A. in a transaction valued at $4.2 billion. Nalco generated revenues of over $2.6 billion in 2002.
GE acquired BetzDearbon in a transaction with Hercules. It then purchased Osmonics. It already owned several companies with ties in water and wastewater treatment. It has positioned itself to furnish the systems, and then provide the consumables and services for those systems. The company also has monitoring capability. Since chemicals represent a large cost in many processes, accurate measurement and, therefore, utilization of those chemicals is important.
Some companies are still becoming more efficient and are cutting costs. Great Lakes Chemical Corporation recently announced plans for a series of manufacturing consolidations, workforce reductions, and other cost reduction steps. The fact that most treatment chemicals companies have now pared overhead and reduced manufacturing costs bodes well for future profits as the industry expands.