Suppliers increase full service options
By Albert Genna -- Purchasing, 3/11/1999
Buyers in the CPI have many paths they can follow to achieve their water-treatment goals. Many continue to simply purchase the chemicals and have in-house experts handle the entire water-treatment process and systems. But in recent years more companies are looking to outsource the entire function. Many suppliers have a host of water-treatment management services available to handle everything from boilers to wastewater treatment.Although municipal water treatment is a large share of the market, it is industrial water treatment that is steering the marketplace. As industrial buyers continue to consolidate the number of suppliers they use and demand higher levels of supplier performance, suppliers are responding with specialized products and more comprehensive service packages.
There appears to be strong growth ahead for industrial water treatment, and growth still is being driven by environmental and performance considerations. These tend to benefit the more specialized products. For many, better water treatment means using more specialized, and more expensive, chemicals. Result: Specialty or proprietary products will gain as buyers continue to shift away from commodity-type water treatment chemicals.
"Much of the growth had been coming from the Latin America and Asia/Pacific regions," says Dale Jenson, vice president for domestic water treatment sales at Ashland Chemical's Drew Industrial Division. "This has slowed due to economic problems in these regions. While we expect demand to be flat this year, it should be back to double-digit growth in 2000." In the U.S., growth is coming from the wastewater treatment area and from the introduction of more environmentally friendly products.
There are well over one hundred suppliers of water-treatment chemicals and services in North America, but it is a relatively small group that controls the biggest slices of the market. Major players include BetzDearborn, Buckman Labs, Calgon, Ashland Chemical's Drew Industrial Div., General Chemical, and Nalco Chemical.
There had been a series of mergers and acquisitions in recent years. "This continues to change our markets and our customers' procurement practices," says Ted Lawson, director of North American marketing for BetzDearborn. "Customers are looking to reduce their supplier base and simplify their sourcing arrangements through sole-source purchasing from full-service suppliers."
Lawson says that full-service suppliers of water-treatment chemicals and systems can help buyers meet many needs. "Customers want suppliers who can meet their global supply chain needs and provide the same consistent level of quality and effectiveness in products, support, and service, regardless of location."
The flurry of mergers and acquisitions has slowed, but not stopped. Late last year chemical giant Hercules bought BetzDearborn, now operating as a division of Hercules.
Needed where water is used
Water treatment is needed any place where water is used for cooling, power generation, processing, or waste removal. Demand in the U.S. is projected to grow near GDP levels. Slow growth is due to new plants having state-of-the-art water-treatment equipment and systems in place.
For industrial applications, buyers often find working with suppliers can help solve complex problems and meet increasingly complicated regulations. Many water-treatment suppliers go far beyond just providing chemicals--services are increasingly important to the water-treatment business. Some suppliers say that the service side of water treatment represents half of the total water-treatment purchase.
Does this pay off for suppliers? It can. Suppliers can get involved in plant operations and provide savings not only in regards to the chemicals applied, but to a customer's overall costs. "The greatest savings we can offer in the cost of water treatment come from our ability to have a major impact on our customers' total operating costs, not just on the chemicals themselves," says Lawson at BetzDearborn.
In North America, the light-industrial and commercial/institutional markets continue to grow at a fast rate. It is in these areas--transportation, food processing, independent power plants, pharmaceuticals, and microelectronics, for example--where new applications will be found.
Basic wastewater treatment still remains one of the fastest-growing applications, as customers move toward water reuse, cleaner effluent, and lower disposal costs. Advanced treatment technologies will be the main beneficiaries of this, including the use of automated control technologies for real-time chemical feed, control and performance monitoring.
Influent and effluent control will remain a strong growth area, with some companies shifting to more specialized products. Industrial water recycling will also grow, and here water treatment will be in high demand as keeping contaminants out will be a concern. Corrosion inhibitors, chelating agents, and biocides will all see significant increases in demand. Oxidizers and biocides still hold the largest share of the market--and for biocides, more non-chlorine derivative products are on the way.
Water purification, using reverse osmosis or ion exchange, whether for drinking or industrial use, continues to grow in volume. "Technological advancements, especially in reverse osmosis, have allowed customers to process significantly more water and at increased purity levels," says Doug May, North American sales manager for Dow Chemical. Dow also launched services in this area in late 1998.
Focusing on full service
Most major water-treatment suppliers are focusing increasingly on providing "full service" for their customers--supplying total water treatment systems including chemicals, technical solutions and control products. Many customers are favoring these types of full-service providers that can treat boilers, wastewater, and everything in between.
BetzDearborn, for example, has introduced a chemical management supply program called Link Sourcing. Each program is custom designed to fit a customer's specific needs--either as a stand-alone or part of an existing supply chain management program. It involves BetzDearborn at every phase of a customer's chemical supply chain--from procurement to disposal.
As part of their total water-treatment management program, BetzDearborn also offers ChemSure, a drumless delivery service that allows for inventory reduction and eliminates the need for drum disposal. There also is a computerized, automatic chemical feed and monitoring system that provides precise control of water-treatment chemicals and an automated 24-hour customer support capability, which minimizes the risk of system upsets.
At Drew Industrial, customers can benefit from Drew being part of Ashland Chemical, according to Jenson. "We can help by buying our raw materials as a part of Ashland Chemical and getting overall purchasing leverage," he says. "We can also help customers reduce the cost of energy by using the expertise of Ashland's energy services division."
"We stay very close to customers," says Karla Doremus-Tranfield, marketing manager for the water chemicals group at General Chemical. "Although we don't take the responsibility to run a customer's system, we push a performance chemical approach to problems."
Nalco Chemical offers BioManage--a program approach to understanding and controlling the bio-diversity in cooling towers. "We examine what we need to do to control particular bio-environments," says Jim Shehee, market development manager in CPI for Nalco. "We don't try to throw chemicals at a problem. We examine and research the problem first, then find the right combination of chemicals, feed equipment and monitoring tools to solve it."
Prices won't move much
Water-treatment prices should remain mostly stable in 1999. "The only way they could move is up," claims one water treatment chemical supplier, "The consolidation that has occurred among our customers--the big water-treatment service providers--has allowed them to leverage the price so much that there is little left on the table."
General Chemical doesn't expect much price change. "Prices on the commodity product side aren't expected to move very much," says Tranfield at General Chemical. According to Tranfield, polyaluminum chloride (PAC) prices are expected to be stable as well, despite increasing demand for the product.
But with the addition of full services, the pricing picture becomes more complicated. "Industrial water-treatment pricing is not based on a market for commodity materials, but on the market for value-added proprietary products," says Lawson at BetzDearborn. "Pricing is just one of several factors considered when products are offered along with full-service application engineering as part of a comprehensive program."
Specialty products growing
Some water-treatment chemicals are commodities, such as caustic soda or aluminum sulfate. But demand for specialty chemicals is growing much faster. Specialty products, such as polymers for sludge reduction in wastewater treatment, or more environmentally friendly scale inhibitors used for cooling water towers are gaining in popularity.
Often specialty products provide performance benefits similar to that of commodity-type products, but they also come with higher price tags. But there often are other benefits to using more expensive specialty products--they are able to perform in a way that results in cost savings in the end. "Many businesses with untreated systems, or using commodity chemicals, can be changed over to specialty chemicals when they understand the improved performance and profitability that can result," says Lawson at BetzDearborn.
Although national suppliers control most of the water-treatment business, a large number of small regional suppliers are thriving. Selling to institutions and light industry, regional suppliers have carved out a niche. But they are also pushing toward supplying larger manufacturing operations. Regional suppliers claim some significant advantages over national companies--including faster response time and stability of customer relationships.
More new technologies
New technologies are always coming into play in water treatment, as suppliers offer new developments to meet shifting regulations and customer needs. Last year BetzDearborn, for example, introduced a cooling water-treatment technology called Dianodic Plus, a halogen stable technology that effectively controls corrosion and scale in the presence of chlorine and bromine, the most widely used microbiological control agents. The benefits include extended equipment life and less downtime.
Ashland Chemical recently introduced Powerboost, a product for cooling water systems that improves tower efficiency and helps equipment operate more efficiently. Ashland will also be introducing a new line of environmentally friendly corrosion inhibitors this spring.
Also, algroup lonza has introduced Dantobrom PG, a paper machine slimicide which reduces or eliminates microbial growth in machinery.
In June, Nalco plans to introduce a line of high-performance cooling water programs able to work in high-stress systems--heartier, more durable programs that can allow systems to run harder and improve throughput in production.
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