Frost: Legislation Drives European Industrial Water Treatment Market

April 10, 2006

In order to capture higher profit margins, participants in the European industrial water treatment chemicals market are shifting their focus from the municipal to the industrial sector, a move which significantly boosts demand for these water treatment chemicals, according to Frost & Sullivan. At the same time, rising environmental concerns have forced regulatory bodies such as the European Commission (EC) to issue directives that govern the use and discharge of water in industrial processes.

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New analysis from Frost & Sullivan found revenues in the European industrial water treatment chemicals market totaled approximately $1.31B in 2005, with estimates to reach nearly $1.94B by 2012. Segmented by application into raw water, process water and effluent water treatment chemicals, the study covered antifoams, biocides, coagulants, scale and corrosion inhibitors, flocculants, heavy metal removal agents, ion exchange resins, odor control agents and reverse osmosis to treat water.

"Legislation, consolidation and opportunities in Eastern Europe have started to influence the dynamics of the water treatment chemicals market in Europe as the competition is shifting toward value-based products and technology, enhanced services, as well as providing total solutions," said Frost & Sullivan research analyst Mahesh Kumar. "Competition to seize business opportunities is increasingly fierce between service providers and chemical manufacturers."

Although stringent legislation in Europe could provide opportunities in the water treatment chemicals market, analysts said it is also anticipated to increase operational costs. This will likely affect the market, as many companies are already involved in forward and backward integration to reduce costs and remain competitive while complying with standards.

Despite advantages such as cost efficiency, the challenge for companies in this industry comes from chemicals being categorized as commodity products. As a result, water treatment chemical producers are focusing on providing value-added services to industries to improve revenues.

"With the consolidation of the industries within Europe, more specialty chemicals are bound to become commodity products," said Kumar. "Commoditization of the water treatment chemicals tends to reduce their price margins and thereby decrease revenues."

According to Frost & Sullivan, water treatment chemical manufacturers that enhance their services, as well as complement their products with better services, are likely to establish long-standing relationships with customers and thereby increase their revenues.

Source: Frost & Sullivan.