OEMs to Pay $30 Billion for Water, Air, Energy and Contaminant Control Products and Services

June 17, 2004

Suppliers of water and air pollution control equipment and suppliers of power plant generating systems will purchase more than $30 billion of products and services this year. The McIlvaine Company, publisher of the OEM Networking Directory, has analyzed the needs of 10,000 companies engaged in supplying goods and services for water pollution control, liquid filtration and separation, water treatment, air pollution control, power plant combustion and steam generating systems, and contamination control systems.

Most suppliers do not even physically manufacture the core product or element in the systems they sell. Often a steel fabricator is the supplier of the core product. Pumps, valves, controls instrumentation, mechanical contracting, and other products and services are sub-contracted. As a result, the most important market for many product and service suppliers is the OEM and not the end user. One company may adopt the strategy of only selling to the OEM. Another will be content to sell replacement products and will concentrate on selling to the end user.

Over the next five years, suppliers of flue gas desulfurization systems will make purchases of $15 billion for delivery in the U.S. and another $12 billion for delivery to other countries. None of these suppliers will manufacture a single component of the systems they will deliver. Nozzles, mist eliminators, vessels, dampers, piping, controls, instruments, ball mills, mixers, pumps, valves, thickeners, and other components will be purchased. Most will hire mechanical and electrical contractors to provide the construction of the systems.

Annual purchases will average $112 million over the next five years. They will be segmented as follows:

Air Pollution Control $ Billions

Fabric filters 1.5

Scrubbers/Adsorbers 2.0

Flue gas desulfurization 3.0

Selective catalytic reduction 1.5

Electrostatic precipitators 1.0

Thermal gas treatment 1.3

Sub total 10.3

Water Treatment and Filtration

Liquid macrofiltration 1.2

Sedimentation and centrifugation 2.0

Biological treatment 15.0

Cross flow membrane systems (RO,UF,MF) 8.0

Cartridge systems 6.0

Sub total 32.2

Power Generation Systems

Coal-fired 40.0

Gas turbine 20.0

Nuclear 5.0

Other 5.0

Sub total 70.0

Grand Total 112.5

While most system suppliers are purchasing all the components from other sources, there is a move by some systems suppliers to integrate vertically. Two examples are General Electric (GE), Siemens, and ITT. GE has purchased suppliers of both air and water treatment equipment which are needed for GE power generation systems. Siemens has followed a similar path with its recent purchase of USFilter.

Second example, ITT has taken the reverse route. As a supplier of pumps and valves, it has expanded vertically upward with the purchase of companies supplying water pollution control systems.

Source: McIlvaine Company

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