Kemira Expands in US Water Treatment Chemicals

15 November 2004 00:01  [Source: ICB Americas]

In keeping with its strategy of focusing on the development of its core businesses, Helsinki, Finland-based Kemira Oy earlier this month acquired coagulant producer Eaglebrook International Group Ltd., based in Matteson, Ill.

Kemira purchased Eaglebrook through a stock acquisition conducted by its Bartow, Fla.-based subsidiary Kemiron Companies Inc. Kemira holds about 60 percent of Kemiron. Financial details were not disclosed, but reports suggest the transaction was valued at somewhere below 70 percent of Eaglebrook’s net sales, which rang in at about $65 million in 2003.

Kemira’s water treatment chemicals division, Kemwater, is already the global leader in producing inorganic coagulants, with revenues of $338 million. The combination of Kemiron and Eaglebrook will create the leading producer of inorganic coagulants in North America, with sales of more than $165 million.

Eaglebrook supplies iron and aluminum coagulants to wastewater and potable water markets. Products will be marketed under the Kemiron name in the US and under the Eaglebrook name in Canada. Kemiron’s geographic presence has been primarily in the southwestern US, and Eaglebrook’s has been in Canada and on the East Coast.

The combined company will be headquartered in Bartow. North America is “a very big and important market to us,” says a Kemira representative. “The acquisition shows our commitment to that market.” Together the US and Canada comprise the world’s largest market for water treatment chemicals, according to Kemira.

The US water treatment chemicals market is projected to grow by an average of 3 percent per year from $4.28 billion in 2003 to $5.28 billion by 2010, says the New York-based consultancy Frost & Sullivan (F&S). Sales for 2004 are expected to touch $4.4 billion, up 2.5 percent from 2003. Growth during the economically challenged years of 2001 and 2002 was only about 2.1 to 2.2 percent.

According to F&S, pH adjusters, water softeners and other inorganic commodities accounted for 15.1 percent ($646.3 million) of the US market in 2003; activated carbon for 13.3 percent ($569.2 million); coagulants and flocculants for 53.1 percent ($2.27 billion); and biocides and disinfectants for 18.5 percent ($791.8 million).

The market has been impacted by the rising cost of raw materials, and producers have attempted to pass on the increases to their customers. Nalco, the market leader, raised prices for various products in July and October. “Cost increases in energy and specialty chemical raw materials, particularly those materials linked to crude oil and natural gas liquids where prices are at historic high levels, have been very significant,” the company explained. “It is now necessary to take this pricing action.” Nalco’s increases in July ranged from 5 to 10 percent, and the October price adjustments were 6 to 9 percent increases.

Kemira recently announced that effective January 1, 2005, it would be raising coagulant prices 6 to 10 percent (depending on the grade) due to “rapidly” rising raw material costs. A Kemira representative says that the outlook for 2005 “shows no signs” of upward pricing trends ending.

Nalco had about $2.7 billion in sales in 2002, followed by GE Betz, the other giant in the water treatment market, with annual sales around $1.4 billion. The global water treatment chemicals market is estimated to be in the range of $5 billion to $6 billion. Cleveland, Ohio-based consultancy The Freedonia Group says that the global market for water treatment chemicals and related products will grow by 6.6 percent per year to $35 billion in 2007.

Because water treatment chemical customers such as chemical formulators and water service companies are demanding a large assembly of technologies and technical expertise to meet their global demands, suppliers increasingly offer “total solutions” and a “one-stop shopping experience,” notes F&S. At the same time, the customer base has been consolidating, aggravating competition, increasing customer clout and, consequently, adding to pricing pressures.

Customers are increasingly receptive to the services business model, says F&S. Following the sale of a chemical or a chemical treatment package, it is beneficial if the manufacturer is able to provide full-service backup in terms of on-site technical and customer service to the end user. “Offering on-site services support is likely to be instrumental in increasing customer retention,” says Suchita Chaudhari, research analyst for F&S’s chemical and materials group. “Response time can be reduced by offering round-the-clock monitoring of water systems and identifying process efficiencies such as water remediation.”

Research and development in this market is being driven by increased customer interest in multi-functional products that are more environmentally friendly, convenient to handle, easy to store, effective at low feed levels, and which leave low residue output.

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