Stringent waste reduction goals bring new life to municipal waste management services market

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August 14, 2002 -- The latest findings by Frost & Sullivan show sustained growth in the Western European market for municipal waste management services.

Signaling an upwards trend in revenue growth, rising investment in new technology and the gradual move away from depositing municipal waste en masse towards the use of pre-treatment will help push overall sales from $31.62 billion in 2002 to $37.87 billion at the end of 2009.

Setting challenging national targets for the reduction of biodegradable waste and its pre-treatment prior to disposal to landfill, the strict regulatory controls associated with the EU Landfill Directive remain a significant driver. Furthermore, growing governmental support for the waste hierarchy principle, which includes the prevention, reduction, recycle and energy recovery (thermal treatment) of waste, will catalyze growth.

While the Directive will only be transposed into law over the next few years, many governments are already reviewing the viability of alternatives to this traditional method of disposal. The rising ubiquity of private sector companies within a number of national markets and the ongoing privatization of municipal interests will help activity in the overall municipal waste management services market shift up a gear.

National and EU legislation, coupled with fiscal measures, underpin the governmental strategy to divert away from traditional disposal methods and to raise public awareness of the benefits gained from pre-treatment. Pre-treatment options such as sorting and separation, thermal treatment and biological treatment, carry a premium price tag and thus offer greater revenue potential to players in the overall municipal waste management services market.

Growth in the European municipal waste management services market was knocked by the high prevalence of landfill as the largest disposal route across many parts of Europe, but the full impact has been offset by legislative pressures.

The study stresses that the willingness of national governments to commit themselves to investment and underline their green credentials will be a further determinant of growth.

John Raspin, Research Manager at Frost & Sullivan, points out: "Mounting pressures on those charged with responsibility for waste management, essentially municipalities, is resulting in a greater need for professionalism from waste contractors and the ability to offer a one-stop-shop for municipalities. Increasingly, integrated waste services are being sought with contractors expected to be able to provide complete waste solutions."

"The use of centralized facilities for waste processing and treatment is increasing, as is the provision of non-core services, along with the waste management package such as maintenance and cleaning. The effect of these developments has resulted in a trend away from low-cost to more technically-driven waste solutions, which is favoring the multinational waste company. Such companies typically are able to offer a complete range of waste services in addition to having expertise in more specialist sectors such as incineration," Mr. Raspin continues.

All participants in the European municipal waste management services market must develop an understanding of the increasingly complex end-user requirements in order to carve a niche in the market, the study warns. The ongoing consolidation is already having implications for those companies who do not choose mergers and acquisitions as their preferred vehicles for corporate restructuring. These contenders must refine their strategies to gain a competitive edge.

French contractors Sita and Onyx, the clear titans of the MSW services market and jointly accounting for 18.5 per cent of total revenues in 2002, operate internationally while being able to deliver bespoke and specialist services if required. Other examples include RWE, Rethmann and Shanks. In this case the companies in question have chosen a more limited focus on particular services, strengthening their positioning through specialization.

Regional and local private sector companies, as well as those operated by publicly-owned companies and municipalities, sit at the opposite extreme of this market transformation. Unable to offer the breadth of coverage, they are increasingly being forced into specific sectors. Some have chosen high-value sectors such as thermal treatment while others are seeking to combine their track record in the market with value and service in an attempt to fend off consolidation across all sectors of the municipal waste management services industry.

The period beyond 2002 is expected to see further growth, although signs of maturity in some European markets will bring about a slowdown in revenue development. On a more optimistic note, average prices are expected to improve on their current depressed levels. This will be largely driven by rising environmental standards, technical improvements in treatment/disposal equipment and a consequent need to recoup investment.

"Over the forecast period, we will observe subtle changes in the relative importance of different sectors as the market moves towards higher-value services," Mr. Raspin reports.

The municipal waste collection services market is the largest sector under analysis in Frost & Sullivan's study. Rising waste volumes helped increase the value of the market from $16.10 billion in 1999 with a further increase to $18.96 billion expected by 2009 largely coming from the demand for separate collection services.

"Thermal treatment will reinforce its position as the second most valuable sector, although the greatest progress is forecast in the smallest sector, biological treatment, whose share of the market will rise by nearly 50 per cent. Such developments will have an adverse effect on the share of the market held by collection services. The shift away from landfill will reduce its profile, however, this decline is likely to be counteracted by rising gate fees," the study concludes.

Code: B088
Publication Date: August 2002

Frost & Sullivan is an international marketing consulting company that monitors a comprehensive spectrum of high-tech markets for trends, market measurements and strategies. This ongoing research is utilized to complement a series of research publications to support industry participants with customized consulting needs. Interviews and free executive summaries are available to the press.

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