Japanese engineering firms broaden to offer water treatment chemicals

A move downstream

23 October 2009 17:07  [Source: ICB]

Japanese membrane producers are making moves into the lucrative processing and management end of the water treatment business

Guest columnist
Junko Ishii/The Chemical Daily

Japan's water processing-related companies are looking to build on their global presence, with a strategic move downstream from their traditional role - marketing water treatment components and equipment - to the comprehensive water treatment management business.

Including operation and maintenance of water facilities and the right to charge for these services, the water management business is estimated to account for around 90% of the water treatment sector overall.

The strategy also gives them a central role in the wastewater treatment and reuse sector, which - in the face of population and economic growth and desertification - is the clear development prospect for the future. "Recycling" is the word of the moment.

In the membrane sector, this has meant a move from simply supplying membranes to the design of equipment and plants incorporating these membranes, and management of the completed facility. Japanese companies already hold a 60% share of the global market for water treatment membranes, principally reverse osmosis (RO) and microfiltration (MF) membranes, which are used in processes from the manufacture of ultra-pure water for industrial use and potable water to water desalination.

In the first example of a Japanese membrane maker undertaking a water-management project single-handedly, Asahi Kasei has started a wastewater recovery and reuse business in China, based on its MF membranes. The service includes a recycling fee for supply of pure water. Its customers purchase a build-own-operate (BOO) system, in which the water treatment facility is installed at its site but operated and managed by Asahi Kasei. Its customers are Japanese-owned plants in the region, where widespread pollution means water is short and regulations on water emissions are strict.

Asahi Kasei sees these first installations as a stepping-stone to a much bigger business, and expects to expand its BOO water management/treatment business to generate sales of yen 10bn ($113m) in the near future. It is quick to dispel concerns over whether its move downstream could produce a conflict of interest in the case of ultrapure water manufacturers, who are important customers for its membranes, but also apparent competitors in the sale of ultrapure water. In fact, Asahi says, its recovery/recycling business supplies pure water, not ultrapure water, and can be seen as a premanufacturing step as far as ultrapure water producers are concerned.

Nitto Denko has set up similar long-term water manufacturing and facility maintenance services using its RO membranes and related technologies in Spain, Tunisia and Singapore, and is expanding its business in North Africa, including Algeria. Its installed BOO capacity is about 600,000m3/day.

Asahi Kasei has started a wastewater recovery and reuse business in China

Attention is also focusing on membrane bioreactor (MBR) technology for recycling wastewater and sewage, where collaborations between membrane makers and equipment manufacturers are expected to lead to greater flexibility in water treatment operations, with companies able to handle different quality requirements from desalination to reuse.

Hitachi Plant Technologies acquired Aqua Tech, a Singapore-based RO system maker, to develop MBR systems. Toyobo, a manufacturer of RO membranes for water desalination, is developing the MBR method jointly with Kubota Corp, the world No. 2 in MBR technology. Kuraray, which has water purification technology based on high-polymer hollow-fiber membranes and polyvinyl acetate (PVA) gel materials, has set up a joint venture - Kuraray Aqua - with Nomura Micro Science, an ultrapure water producer.

Japanese engineering companies are also highly competitive in the global water-treatment equipment sector. For example, Mitsubishi Heavy Industries is world leader in construction of environmentally friendly desalination plants using RO membranes.

In one collaboration, a number of engineering companies have worked closely with Japanese trading houses, benefiting from their strong business links in the Middle East, Asia and North Africa to secure large-scale power and water desalination projects. Toyo Engineering is working with Mitsui & Co, while Chiyoda Corp. is collaborating with Mitsubishi Corp. JGC Corp. is also investing in such projects, and the Japan Bank for International Cooperation has identified the water business for investment.

INVESTMENT POSSIBILITIES
Trading houses are focusing on the water business because of its relatively stable business structure. Mitsubishi Corp. set up a department dedicated to the water business that is able to draw on the contacts from its entire operation. Mitsui & Co. set up a consortium of 15 companies in China, including engineering companies and pharmaceutical makers, to serve as a contact point to obtain effluent water treatment projects.

Such collaborations have been helped by the formation this year of the Global Water Recycle System Association by 14 Japanese companies from water treatment businesses. It now comprises 38 companies, and was set up to further cooperation between firms in different parts of the business.

The Japanese government has also positioned the water treatment-related business as an industry to be nurtured. In July, the Ministry of Economy, Trade and Industry set up the Water Industry and Infrastructure Systems Promotion Office.

A governmental support infrastructure is being prepared. In addition, a panel named the Study Group for International Development of Water Business was set up in April.

Consisting of representatives from industry, academia and government, it will study solutions for developing the water treatment business in the global market. A report will be completed in March 2010.

Japan's local governments are also aiming to expand their activities overseas using their business management knowledge of having supplied what they describe as the world's best quality water for 120 years. Osaka city has linked up with water treatment companies through the Kansai Economic Federation to develop business overseas, and - unlike many local governments that view water management as a public service - has made clear that it views overseas projects as a new source of finance.

In a second public-private sector tie, JFE Engineering has been awarded a first national project to promote its own decentralized water supply system overseas, in collaboration with Kawasaki City Waterworks Bureau, which will provide advice on management of the quantity and quality of water treatment and a system for charging for the service.

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