Water - a mega trend and multiple opportunities

There is a plenty of water, but not where people want it. At the same time, the between surface water (renewable) and water from aquifers (may not be renewable) tends to be blurred. The fundamental driver for water related investments is the opportunity to ease the pressure for people migrate as water availability changes and the associated cost by easing the access of water! Water demand tends to grow 2x the pace of population growth and the supply of freshwater is relatively fixed and unevenly distributed.

Water sector is very complex and investors are drawn in by combination of large markets and powerful secular themes such as: population growth, rising water consumption per capita (e.g. USA personal consumption increased approx. 10x per capital in 20th century), aquifer depletion, increasing scarcity of supplies of fresh water and even climate change as the recent hot topic! There are many chemical and related companies are making big bats to benefit from the water needs and the question is who would be future winners? Would not keep your eyes open to the disruptive technologies and unsustainable trends that may turn a leader into a loser?

Shortage of water is creating an active consideration for the placement of chemical facilities. For example, water intensive operation such as coal-to-olifins (in China) or ethanol (in USA Midwest) could create water stress that will create a significant cost component for many industrial companies. Now, this could create opportunities forward thinking companies who have clear strategy on water savings as a broader value proposition (e.g. ability to extract methane from dairy firm wastewater may provide an attractive opportunity to benefit from reducing both downstream pollution and dairy farm energy cost!).

Chemical companies who are in Agricultural business could also change the game if they can create a winning value proposition “…more crop per drop”

Infrastructure related water companies would also benefit such as storm-water system, smart water metering and loss prevention solutions. Rising energy cost is threatening the economics of desalination and innovation in high yielding plant, process might be important. New technologies particularly using reverse osmosis membranes appear to be more competitive than previously.

Industrial water treatment would have to focus more on energy efficiency, process optimization and conservation. The unique ability to combine chemical treatment, mechanical equipment and services, and/or emerging technologies might open opportunities for new entrants for this market. The big question is, how will the supply-demand be balanced in light of global politics?