FocusWater industry provides opportunities for chem companies

28 August 2009 15:25  [Source: ICIS news]

By Lucy Craymer

Water provides future opportunities for chemsLONDON (ICIS news)--The global water shortage, exacerbated by a growing population, is providing growth opportunities for petrochemical and agricultural companies, according to analysts on Friday.

“Chemical companies should have opportunities in desalination, energy efficiency – a large factor in the cost of extracting and delivering fresh water - and water treatment,” Jefferies and Company’s analyst Laurence Alexander told ICIS news.

He added that as now the credit markets had begun to ease some of the desalitation projects that had been pushed back might be revived.

And with a research note from the company suggesting as much as 40% of the earth’s population could face either water stress or scarcity by 2050, plus the much talked ageing infrastructure, government stimulus packages and a growing demand for water for industry – there is no doubt that there are opportunities out there.

This is backed by US consultancy firm Freedonia, who said in a report entitled “World Membrane Separation Technologies to 2012” that global demand for membranes was projected to grow 8.6% annually through 2012.

“Concerns about water quality and waste stream disposal, as well as food and beverage safety regulations, will propel sales. Large, developing countries with stressed local water resources will be the fastest growing markets,” it added.

With this in mind chemical companies, plastic manufacturers and agribusinesses are telling shareholders that some portfolios are being refocused to make the most of these opportunities.

Dow CEO Andrew Liveris flagged the potential of the company’s water division, which makes membranes used in the treatment of water, at a conference following the release of its second-quarter results at the end of July  

“Businesses like Dow Wolff Cellulosics, Dow Water & Process Solutions, the evolving portfolio of Automotive Systems, Polyurethane and Epoxy Systems and Dow Solar Solutions all have the power to reshape our earnings profile even further toward one that is built on science and technology,” he said.

Nalco made similar comments, saying that it was taking “full advantage” of its water services area and that it wanted to accelerate the penetration of existing accounts around the world for water cooling towers.

Jefferies and Company analysts, in a primer about the water companies, recommended investing in businesses such as Nalco – for its involvement in industrial water treatment and “green” building designs – and Monsanto, who have engineered seeds that can survive in dryer climates.

“Beyond our overall bias to shares trading on low multiples, we believe the best opportunities will be companies with technology that has sustainable scarcity value that enables scalable business models,” it said.

For Finnish chemicals company Kemira water chemicals is not a new business division, but the company now has a rosy outlook. Although Kemira has a water chemicals division, its oil and mining buisiness and paper business mainly deal with water treatment chemicals specifically for these markets.

Kemira president and CEO Harri Kerminen said that whether there was a recession or not, water was getting more expensive and more importantly, providing opportunities for his company.

"Outside our paints business, already 75% is water related. Water treatment will be the driver for the whole of Kemira," he added.

Kerminen said the company was forecasting that there were long term opportunities in the water industry, particularly in emerging markets.

It is a sentiment expressed by both Siemens and GE plastics, whose water units have suffered - in the case of GE - or for Siemens have failed to grow.

However, both companies have come out publically in recent weeks to say that they were in the industry for the long term believing the emerging markets and ageing infrastructure would provide future opportunities for their technologies.

Read Paul Hodges’ Chemicals and the Economy Blog
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By: Lucy Craymer
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