Water treatment a growth area, says study

Water and wastewater treatment equipment supplies to chemical industry are staging impressive growth, according to a new study by Frost and Sullivan

The chemical industry's broad spectrum of heterogeneous outputs catapults it to the top league of customers for water and wastewater treatment equipment, accounting for 24 per cent of this sector's total industrial client base.

Manufacturers' ongoing endeavours to obtain ultrapure water qualities, to measure resistivity and pH levels and to minimise the level of water pollutants - such as suspended solids - in the incoming water, will augment the need for water and wastewater treatment equipment in the chemical industry.

Water used during the production processes, whether for manufacturing, washing, cooling or heating, must meet purification and product liability consents, while the polluted effluent requires sufficient on-site treatment in order to respond to mounting legislative pressure.

The sheer wealth of the chemical sector, coupled with market players' efforts to reinforce their environmental credentials and the lure of cost advantages attained through efficiency improvements, will add to the momentum.

Frost and Sullivan, the international marketing consulting company, expects sales of water and wastewater treatment equipment to the European chemical industry to rise from $319.0 million in 2000 to $409.8 million in 2007.

The study cites saturation of new demand as the most critical inhibitor to revenue growth.

Furthermore, the fragmented nature of the chemical sector poses a restriction on consistent supply opportunities.

"However, the general economic benefits and growing regulatory forces are prompting customers to take on larger, one-off investments in complete upgrades.

Due to the diversity of on-site demand, annual investment levels in maintenance and replacement purchases span a wide budget range.

Expenditure ranges from a minimum of around $300 to $2 million for the largest plants in Europe.

This clearly highlights the breadth of tantalising opportunities the chemical sector boasts for suppliers of water and wastewater treatment equipment," reports Saana Karki, Research Analyst at Frost and Sullivan.

"The approaching maturity of the market has expanded manufacturers' interest in cost-efficient solutions for recycling wastewater at all stages of the production chain.

Customers are also exploring methods of recovering wastewater pollutants and, through the application of chemical stripping procedures, reclaiming relevant substances back in the production process or upselling specific types of chemicals," Karki continues.

According to Frost and Sullivan's survey, 49.1 per cent of customers have already installed on-site wastewater recycling systems.

As waste minimisation projects rise in popularity amongst manufacturers, on-site treatment systems are becoming increasingly complex and sophisticated.

Critical success factors for product performance include quality and reliability, competitive pricing and the provision of a customised solution.

On the supplier side, the study identifies specialised supply, proactive development and committed support as top-ranking criteria.

In the chemical sector, firmly established relations are important and loyalty to existing suppliers remains high.

Since past experience and established customer relations form a solid foundation for successful market positioning amongst the market's supplier base, brand recognition also depends heavily on existing relationships.

Frost and Sullivan's findings crystallise a certain level of disillusionment with suppliers and a low level of supplier awareness among chemical manufacturers, indicating limited involvement in current market dynamics and an industry-specific tendency to rely on internal capabilities instead of turning to potential suppliers.

The fragmentation of the chemical industry dictates a high regional presence as a key source for raising the overall profile of a supplier in the European water and wastewater treatment equipment market.

Specific suppliers have gained kudos through strong leadership qualification on a regional basis.

Degr?mont enjoys the highest level of brand recognition in the European water and wastewater treatment equipment market, the study reveals.

On a regional level, Culligan and Guinard Centrifugation are extremely dynamic brands, claiming some of the highest ratings and scoring extremely high awareness levels in Frost and Sullivan's survey.

In the mid-range, Millipore, Pall and HOH also post reasonably strong supply positions.

Customers in the chemicals industry become easily inured to the sufficiency of installed solutions and past supply, and seldom go further afield.

The study warns that this lethargy has led to a notably low overall supplier awareness, thus crippling future supply-side evolution and restraining further market penetration.

"This trend is a challenge for suppliers," Karki notes, "mainly being offset by improved servicing and more proactive upselling of beneficial and cost-efficient upgrades.

Amid further legislative and regulatory fears, chemicals manufacturers are generally forced to maintain high quality on-site treatment and step up further investment." Due to the diverse and often unique treatment conditions, technologically specialised service, along with product quality and reliability, is a particularly essential element of the purchasing decision process and customer satisfaction in the chemical sector.

The study highlights that chemical manufacturers consider passive and reactive sales, lack of specialised supply, price concerns, delivery failures and insufficient services as the main supply pitfalls.

Karki explains: "Passive supply nurtures a lack of customer involvement, destroying long-term supply confidence and market awareness.

This has become one of the key threats facing the industry.

As a growing number of suppliers are beginning to provide added customer support, those market participants that fail to deliver such benefits are likely to be outperformed.

Still, many customers continue to experience a nearly nonexistent supply relationship." Competitiveness in this industry is ultimately determined by the ability to meet product specifications and, increasingly, service requirements.

The scrutiny of supplier selection, particularly in terms of technological specification, is also reflected by the number of customers that still rely on in-house expertise to construct particular parts of the on-site treatment.

While many customers are skilled engineers themselves, 23.1 percent of water and wastewater treatment customers merely buy a product and take care of the installation, construction and maintenance.

However, the larger part of distribution to this industry no longer involves mere equipment design but also suggests a strong emphasis on serviceability.

This outsourcing trend is clearly becoming an emerging market opportunity in the nature of supply to the chemicals industry.

Currently, the majority (53.9 percent) of customers have already appointed suppliers to handle at least part of the maintenance, with over a tenth now outsourcing all on-site treatment facilities including maintenance and operation.

Providing a comprehensive assessment of the specific water and wastewater treatment requirements in the European chemical industry with a strong focus on the equipment purchasing experience, this deliverable forms part of Frost and Sullivan's ongoing monitoring service of water and wastewater treatment equipment markets.

The study explores the crucial elements of customer opinions, attitudes and supply expectations as well as the overall drivers and restraints of demand and purchasing requirements.

In addition, on-site treatment technology trends, brand recognition, supplier ratings and expenditure patterns are examined in further detail.

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