Prospects of the Russian market of water treatment systems in terms of the crisis

Sep 09, 2020

Marketing agency MegaResearch conducted an analysis of the market of water and wastewater treatment systems in terms of spread of coronavirus infection and a strong decline in world oil prices. According to experts, in the period from 2020 to 2022, the market can develop according to different scenarios depending on objective factors and the actions of state authorities.

The development of the Russian market for water treatment plants in the past five years was largely determined by the strengthening of state environmental control and an increase in fines for non-compliance with existing standards. Large industrial enterprises were forced to invest heavily in the modernization of their treatment facilities, so the industry coped with the crisis of 2014โ€“2016 relatively calmly. The accumulated safety margin and a relatively low level of import dependence suggest that in the context of the spread of coronavirus infection and a strong decline in world oil prices, the market will be able to function without serious shocks, especially since domestic manufacturers have the opportunity to completely replace foreign products with their new developments.

Market stability in crisis situations

According to analysts, the water treatment systems market is going through periods of economic crises relatively calm. This happens for several reasons:

1. A small share of imports. Approximately 20% of components in water treatment systems are of foreign origin, the rest is the products of Russian companies.

2. Strict environmental requirements. According to market participants, fines for violations of the requirements for the quality of discharged water have increased tenfold over the past year, so the installation of treatment facilities is becoming economically profitable. If earlier about 30% of enterprises preferred to pay fines (it was cheaper), and about 50% tried to use existing loopholes in the legislation, then in a survey of market participants conducted in 2019, 45% announced plans to install or modernize a water treatment system ...

3. Obsolescence of equipment. Most of the systems currently in use were installed 20 or more years ago. Since the financing of environmental programs in the early 2000s was carried out on a leftover basis, the technologies used in these systems were developed in the last century.

Impact of the coronavirus and the fall of the ruble rate on the water treatment systems market

As you know, the word crisis in Chinese consists of two hieroglyphs, one of which means danger, and the other - opportunity. The dangers of the spread of the coronavirus pandemic are quite understandable and do not require detailed analysis.

As for the opportunities, they are quite real for the wastewater treatment plant market and, with a favorable development of situation, will provide a basis for further growth:

- an increase in foreign exchange rates will lead to a further rise in the cost of imported components, which are still used by manufacturers of treatment plants. In a crisis, technical solutions will win, which will be lower in price than the existing ones, but will provide the required level of efficiency;

- the spread of coronavirus can cause the adoption of additional standards for the treatment of wastewater, as a viral infection can spread through water supply systems. Strengthening industrial emissions control will give an additional impetus to the development of water treatment technologies and an increase in demand for the installation of appropriate systems.

Market stability will also be supported by continued demand from major consumer industries.

The main consumer of water treatment systems is the oil and gas industry. Despite the decline in world prices, a decrease in oil production in Russia is not planned, so the implementation of environmental programs in the industry will continue. Analysts predict that the demand for water treatment equipment from oil and gas producers will remain at the level of 2018-2019.

Forecast of the development of the water treatment systems market for 2020โ€“2022

Depending on what measures will be taken in connection with the coronavirus pandemic in Russia, the market development can have two main scenarios:

1. Optimistic. If the spread of the coronavirus causes the introduction of additional standards to improve the quality of purification of drinking water, supplied to the population, and household wastewater from enterprises and settlements, the market for water treatment facilities will grow. Earlier, under more favorable economic conditions, growth was projected at 5% per year. In the current situation, the forecast has been lowered to 2%.

2. Pessimistic. Under these conditions, the Russian government may agree to temporarily curtail environmental programs in order to provide financial relief to industrial enterprises during the crisis. In this case, the market expects a slowdown in growth rates. However, the decline is unlikely to be serious (no more than 5% per year), as the depreciation of the ruble will increase the demand for Russian products in foreign markets, primarily in neighboring countries.