Ascendant thermal methods encroaching on landfill in sludge disposal

Sludge disposal is entering a period of dramatic change, driven mainly by tightening European Commission legislation.

March 19, 2003 -- Sludge disposal is entering a period of dramatic change, driven mainly by tightening European Commission legislation.

The implementation of the Urban Waste Water Treatment Directive (UWWTD) has accelerated sewage sludge volumes. This challenging issue manifests itself in the development of particularly sophisticated services as well as greater up-stream treatment.

Reliable and safe sewage sludge treatment is a major concern amongst local authorities across Europe. Simultaneously, mounting pressure from regulators, the public and other environmental stakeholders is reducing the availability of acceptable disposal options.

A new study by Frost & Sullivan, the international market consultancy, values the European market for sludge disposal services at $2.9 billion in 2002. The shift from landfill to thermal disposal routes, encouraged by landfill taxation and increasing land disposal restrictions, will push revenues to approximately $3.5 billion by 2009. Robust pricing trends and ongoing growth in sludge volumes will further expand this lucrative business.

Saana Karki, Industry Analyst at Frost & Sullivan, reports: "Land filling has come under increasing scrutiny. At the same time, agricultural use is being criticized, composting opportunities are limited and incineration restricted by pollution controls and the NIMBY (not in my backyard) syndrome. Thus, players active in this field are forced to continuously revolutionize their sludge disposal strategies."

Capacity shortfalls within national markets will most likely hamper the desired move away from landfill and towards alternatives, in alignment with waste hierarchical principles. These shortfalls largely pertain to delayed investment in new treatment and disposal facilities.

Municipalities looking to construct large and expensive thermal treatment plants are confronted with financial and legal delays. In Portugal, for example, such shortfalls have resulted in extensions being granted in meeting EU deadlines. This timing gap between land restrictions and capacities is a major stumbling block for growth, the study points out.

Ms Karki continues: "Despite the actions of many European governments phase out landfill use, it remains an important sludge disposal route. The associated low cost has historically been its unique selling point and despite efforts to restrict its long-term role in the waste market, the method will continue to stand firm.

However, amid punitive taxation, increasingly diverse alternatives and rising prices, the long-term shift in favor of thermal solutions should diminish the negative impact of this restraining factor.

Revenues as well as profit margins have particularly escalated in the promising incineration business in the wake of land restrictions. Thermal sludge-to-energy initiatives are increasingly generating additional revenue streams within the disposal market - total sludge combustion is expected to account for nearly a quarter of total service revenues by the end of the decade.

Outsourcing trends and growing demand for higher value thermal solutions provide additional impetus for growth. Fiscal policies encouraging the shift from low cost land filling to alternative disposal solutions will further inject vigor into the European sludge disposal services market.

Despite persisting public and environmental pressures, agricultural recycling is still forecast to retain its dominance as the key disposal route in the coming years, accounting for slightly less than half of all disposals. This will be endorsed by improved up-stream treatment efforts to meet heightened demand for pathogen kill. The most notable change down-stream is the increase of thermal disposal and slowly rising presence of the less conventional channels, such as composting and land reclamation, in favor of traditional land solutions.

Multinational waste management companies will be reaping the benefits of the growing trend towards more technologically driven sludge solutions. These market players are typically in a position to provide a complete range of sludge services as well as having expertise in specialist sectors, such as incineration.

Ms Karki comments: "This approach is being illustrated by French contractors Sita and Onyx, who operate internationally, however, have the competencies to deliver bespoke and specialist services if required."

RWE Umwelt, Rethmann and Shanks have all chosen a more limited focus on particular services, developing their strength through their respective specialization.

Frost & Sullivan's study points to the importance of understanding the increasing complexity of end-user requirements. Although prices are expected to remain relatively high across all sectors and geographical markets, Frost & Sullivan's own view is that companies should target non-price factors. Service issues, in particular, are gaining in eminence, specifically the demand for professionalism from service companies as well as the ability to offer a one-stop-shop for municipalities with multiple sludge concerns.

The European market for sludge disposal services remains in a state of flux. EU and national legislation seeking to develop a more environmentally conscious approach towards sludge disposals will continue to be the main driver behind growth in this industry.

Equally important, Frost & Sullivan's study concludes, is the willingness of national governments to commit themselves to investment and change. Certainly, the process has already commenced with the privatization and outsourcing of municipal and state-owned companies likely to continue, and the share held by the public sector expected to see further decline.

Price: EUR 6,000
Publication Date: March 2003
Report Code: 3815

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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Kristina Menzefricke, Public Relations Department
Tel. +44 (0) 20 7343 8376
Fax. +44 (0) 20 7343 8380

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