Dec 12, 2005

Filtration Marketplace Expanding

Outlook for global water/wastewater filtration marketplace positive

The global marketplace for filtration-related systems in the water and wastewater industry is growing at an annual pace of 5%. Specifically, China is the largest growth market with massive spending planned in all related water sectors, mostly for new systems. As for the U.S. and Europe, filtration-related spending is expected to increase primarily in the areas of upgrades for existing water and wastewater treatment plants.

Many of the manufacturing companies reading Water & Wastes Digest identify one of their core market segments as water and wastewater treatment, and more specifically, filtration.

This filtration-related segment comprises five main areas: drinking water (municipal water treatment) industrial water, municipal wastewater, industrial wastewater and process treatment. Treatment methods can be segmented into liquid macrofiltration, sedimentation and centrifugation, cartridges, RO and other cross-flow membrane systems, biological treatment, and other physical/chemical methods including disinfection and chemical treatment.

One of the major costs in these processes is operating expense, which includes labor and materials other than chemicals, the actual purchase cost of the chemicals and depreciation. In this case, depreciation is equal to the capital investment if the rate of investment is constant. It is less than the investment for the current year if the investment is growing.
In general, depreciation will be somewhat less than capital investment in 2006.

Filtration forecast

The following chart provides various forecasts for the cost of owning and operating filtration systems in 2006. The operating expense is derived from employment estimates and other variables such as the cost of water.
For example, in the U.S., there are 120,000 people working in municipal drinking water treatment plants. Their direct pay is close to $2.5 billion, and with indirect expense labor cost, it is nearly $5 billion. This represents almost half the operating costs of the $11 billion estimated for this sector.

The annual cost of water treatment and filtration will be $271 billion in 2006. Of this amount, operating cost accounts for $189 billion, chemical cost is $17 billion, and depreciation is $65 billion. The total annual cost of $271 billion does not reflect revenue opportunities for suppliers as the bulk of the cost is for the operation of facilities.

Presently, only 4% ($8 billion) of these costs are outsourced as full outsource contracts or as service agreements for specific processes or equipment. Outside purchased repair parts account for $30 billion. Therefore, of the $189 billion, outside suppliers will generate revenues of $38 billion.

Because the market is growing at 5% annually, the sales of capital equipment and systems exceed the depreciation. The $70 billion listed within the chart represents system and component purchases.
Currently, China is the largest growth market with sizeable expenditures planned in all of the water sectors.

Whereas the bulk of Chinese expenditures are for new plants, the expenditures in the U.S. and Europe are primarily for upgrades and operation of existing plants. The large capital slated for investment in the chemical, steel, pulp and paper, and other basic industries in Asia will result in Asia leading other regions in the process segment.

About the author

Robert McIlvaine is president of the McIlvaine Co. He can be reached at [email protected] or by phone at 847/784-0012.