Market Viewpoint: Is the Water Treatment Market on the Verge of Rebounding?

Sept. 10, 2014
The issue of whether the water treatment market will rebound or not and what type of growth can be expected upon returning is questionable. If the market recovers, the progression is expected to be slow and steady with no major growth spikes because municipalities and companies are evaluating each project on merit and necessity, as they don’t want to inherit additional debt.

By John D. Dyson

It has been many years since the recession, and the stock market has rebounded to all-time highs. There are, however, many remaining questions in the water industry: Will the water treatment market rebound in the near term? What type of growth do we expect when it returns? Is the growth going to occur across the country or be regionalized? What will drive the water treatment market? What has prohibited a rebound of the water treatment market thus far?

Many of us would like to know the answers to these questions in order to better plan our businesses to respond to the future market. I have been in the water treatment business for more than 20 years and have seen a few business cycles related to economic downturns. This industry downturn, however, is unlike the others because there are no distinct drivers in the market that will result in a clear path to growth.

That said, I do believe the water treatment market will rebound, but it will be a slow, steady progression with no major spikes in growth rate. This is because municipalities and companies are evaluating each project on merit and necessity, as they don't want to take on additional debt. Many are still paying off debt from the last economic boom. As a taxpayer, I applaud municipalities for being frugal with citizens' money and showing good restraint.

I don't believe growth will be universal across the U.S. because each region of the country is experiencing different population changes, from declining to rapid growth. Areas of faster population growth will likely see expansion of facilities, while areas of decreasing population will focus on rehabilitation of facilities.

A variety of drivers -- such as new regulations, environmental issues, drought, and potentially others -- may have a regional or local impact on the water market, but there's no large pending regulatory issue that will impact the national market across North America. While there are local issues with contaminants that will require municipalities or companies to act, it is not widespread. As we have seen in the past, droughts will stimulate the markets temporarily, but projects will be postponed once it starts raining again in drought-stricken regions.

As for what issues might be preventing a rebound, in some cases it's the lack of direction from the regulatory and legislative side of the business. If regulations are not passed or guidance is not provided, municipalities and companies cannot prepare to handle compliance issues, which results in project delays. In some cases, regulatory direction is indeed offered but is challenged by interest groups in the form of a lawsuit. This results in the delay of new, improved standards for the health and safety of people and the environment, as well as for water and wastewater.

Lastly, how will we pay for much needed water and wastewater infrastructure? The needs are vast, from replacing pipes and valves in the ground to building new or rehabilitating old treatment facilities. These needs are well documented and will cost in the hundreds of billions of dollars. Everyone talks about the need for more financing. I think the issue is not about whether a project is financed at 10, 5 or 1 percent interest but rather that the customer base must pay for it at a reasonable price and be educated about what is involved in providing water and wastewater treatment. Generally speaking, our customers do not value the product we provide until it is not available. As an industry, we must educate our customers about the needs, requirements and costs to provide the product (i.e., clean water and wastewater) that is delivered to them.

Whether it is a municipality or company, we all must charge the customer what it costs to provide them that product so that we can fund and plan for replacement. If we don't, our industry will never bridge the gap between big needs and available funds.

About the Author: John D. Dyson is sales director of Americas at Severn Trent Services. He is a WWEMA board member and chair of the Legislative/Regulatory Committee.