Water Online

September 2017

Water Innovations gives Water and Wastewater Engineers and end-users a venue to find project solutions and source valuable product information. We aim to educate the engineering and operations community on important issues and trends.

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High amounts of lead have also been identified in a number of municipalities. To protect themselves, a number of commercial firms have agreed to increase their use of process water. For example, the food and beverage industry uses public water for many purposes. Operators in this industry have a major stake in ensuring that water used in their processes is of high quality and purity, since it is used to make products that will be consumed. Moreover, water is also used to clean and sanitize floors, processing equipment, containers, vessels, and the raw food products prior to processing. Given the breadth of industrial and commercial processes in which the use of water is integral, and because reserves are shrinking, the need to identify an alternate resource is imperative. To Build Or Not To Build Water supply conditions have been spurring a dramatic increase in demand for process water in the past three years; however, suppliers have not been equipped with the reserves to meet this demand growth. Further, process water suppliers have incurred higher operating costs. In response to sales growth, upstream suppliers have raised the price of integral inputs and equipment used in the process water production process. Consequently, to protect their profit margins, process water suppliers have been passing their heightened production costs on to buyers in the form of higher prices. Downstream suppliers that have negatively affected bottom lines include water treatment chemical suppliers, water quality testing equipment suppliers, water well drilling service providers, and water hauling and vacuuming suppliers. For example, the price of water treatment chemicals is influenced by the production of process water because water softening compounds and demulsifiers are integral inputs used in the process water production process. According to IBISWorld, the price of these inputs and other water treatment chemicals increased 1.0 percent in 2016 and is projected to grow at a slightly faster pace in 2017, thereby making it more difficult for process water suppliers to expand production levels to satisfy demand growth. Similarly, IBISWorld projects spikes in the price of water trucks, which are used to store and transport process water. This trend will hinder suppliers' ability to control their overall costs. Because the price of sourced goods and services will negatively affect suppliers' bottom lines, suppliers are expected to raise the price of process water. In the event that the spike in input costs persists and water supply rates continue to increase, industrial and commercial firms will look to other solutions, such as establishing water treatment facilities in-house, to offset continuous price hikes. In fact, in recent years, many large industrial firms that require significant quantities of process water have turned to building on-site process water facilities, bypassing the need for outsourcing. Unfortunately, this method is often not cost-efficient for all buyers. For low-volume water users, this alternative is costly and therefore not a practical solution. Looking Forward Although municipalities have every intention of building low-cost, high-quality water supply systems, the constant delay and its impact on the existing water supply systems are expected to make it less feasible to do so. According to the American Water Works Association, to replace all pipes in the U.S. today, water utilities would have to invest $250 billion to $350 billion over the next 20 years. If the investment isn't made soon, this cost could triple by 2030. However, demand for process water is expected to expand in the next three years alone, causing prices to rise as a result. Growth in the price of process water will, in turn, prompt more investments to be made in in-house water processing. n PROCESSWATER About The Author Deonta Smith is a lead procurement research analyst for IBISWorld, specializing in construction and infrastructure. He holds a bachelor's degree in economics from Pepperdine University. The research featured in this article can be found at ibisworld.com/procurement. wateronline.com n Water Innovations 23

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