This spring’s good news about passage of infrastructure spending served as a reminder that we had yet to address the clean water industry in our discussions of economic outlooks for the country for the year ahead.
The spending bill that Congress passed allocated $21.2 billion for infrastructure, $1.4 billion of which will be for water infrastructure. $500 million will be for grants for clean drinking water and sanitary waste disposal. The other $918 million will go to water infrastructure projects to be performed by the Army Corps of Engineers and the Bureau of Reclamation. How does this funding mesh with economic projections for the industry?
Strong Growth Ahead
Hexa Research projects significant growth through 2025. It projects the global water and wastewater treatment markets to reach USD 674.72 billion at that point. That’s up from USD 462.16 in 2015. The Asia Pacific region is dominant among the international markets, with rapid industrialization and population growth being the key drivers. The Middle East is also going to be an area of steady growth. Drivers there are increasing population, disposable income, and groundwater scarcity.
That report discusses various segmentations by type, with service and maintenance comprising the largest share of the market. A more narrow analysis by Grand View Research speaks to the treatment equipment market alone, though it seems to support the growth projections. They cite increased stress on global water resources and growth in needs for industrial wastewater treatment and disposal as main factors, and they point to this as driving a boost in water reclamation requirements. New regulatory requirements in many regions are also indicated as contributors to industry growth.
A major element in the capacity growth projections for water and wastewater treatment is the growth of the housing market. An e-book put out by RSM describes modest growth for the housing industry. Homebuilder sentiment as measured by NAHB stands at 69, a little below the cyclical high of 74, reached in December 2017. This typically correlates with new housing starts. Availability, affordability, and access to credit are potential dampers on the growth.
In general agreement with the Hexa Research report is the wikiBIZpedia entry on the subject. They describe a global market in which half our world’s population will deal with water stress by 2025 and where nearly 90 percent of wastewater in developing countries ends up in rivers, lakes, and the ocean, untreated. The entry states expectations of water demand increasing at a CAGR of 7 percent and a water industry growth of CAGR 3.9 percent for the next five years. They also emphasize a number of technologies expected to experience growth. These are filtration and disinfection (especially UV), membrane treatment, desalination, and zero liquid discharge technologies.
The wikiBIZpedia entry lists a large number of market drivers. A number of these could be under the category of more efficient water management, reuse, and recycling as they are impacted by population and water demand growth issues. World-wide manufacturing growth and its associated increasing water demand is one item that stood out, as is the replacement of old infrastructure. The oil and gas industry in particular is described as a significant driver as that industry is increasingly looking for solutions to allow reuse of the wastewater from drilling and hydraulic fracturing.
Research and Markets provides their analysis and forecast for 2016 to 2022, and it too reinforces what others are projecting. It is also very positive about zero liquid discharge (ZLD) technologies. It believes that this, coupled with other smart water solutions, will overcome the financial barriers and energy consumption challenges to the market. It further expects private-public partnerships to play a huge role in the water/wastewater industry.
With the raising of the issue of financial barriers as one of the challenges to the water and waste water industry, we return to the good news in the opening paragraph. With a global market in the range of USD 500 billion, and a US share of that at about $4.5 billion, the $1.4 billion allocated in the infrastructure spending bill seems a bit on the short side. Admittedly, it’s hard to make an apples-to-apples comparison in terms of what share of each number is equipment and how much is services, but nonetheless, we can deduce that government funding alone will not keep pace with needs.
This may be one reason Research and Markets puts such strong emphasis on private-public partnerships as key to the future of the industry, funding, partial or full, coming from sources other than government. It also spotlights the importance of more efficient water management, reuse, and recycling, as mentioned above as key drivers. Saving money is a critical function in order to help afford the needed growth. Not mentioned in any of the reports highlighted is the role that alternative delivery methods, such as design-build, could play in shortening project schedules. Time is money, and shorter schedules logically imply cost savings.
Growth is ahead, but keep in mind the challenges and their solutions.