by The Editor, Global Water Intelligence Insight, Published 10th May 2012
I was in Munich this week for IFAT, the awesome German environmental trade show. It is difficult, as a non-German, to visit without a tinge of jealousy. The stands were heaving with rich German customers spending money in a way not seen elsewhere in Europe or North America. It seems to me that the German water technology sector is enjoying a unique confluence of circumstances.
The first thing that is benefitting the German water industry is what it specialises in. The French may do operations, the Spanish may do desalination, the Danes, pumps and the British, finance, but the Germans do sludge. It is an area of the business which requires relatively sophisticated process engineering of the sort that the Mittelstand does well. Almost every German exhibitor at the show seemed to offer a full range of sludge driers, centrifuges, presses and screens.
This is a nice place to be at the moment. Sludge treatment is probably the fastest growing area of the municipal water sector. The combination of greater investment in wastewater treatment, more restrictions on sludge disposal, and the potential for developing an income stream in the form of energy and materials recovery means that it is attracting investment even when other areas of the water sector are struggling.
The second thing that benefits the German water industry is the lack of international competition. IFAT is unique in that it is a very large show (215,000m2 or 2.3 million square feet of exhibit space), but there is very little to distract German buyers from German suppliers. This is an anomaly in today’s globalised world, especially given that the sludge management equipment which dominates IFAT is relatively low-tech machinery. The reason why it has happened is because Germany is a much more developed market for sludge management equipment than any other. China, for example, has only recently started to treat wastewater on a large scale, and has yet to develop sludge management equipment suppliers which can compete internationally.
The third thing which benefits the German water industry is the Euro. If Germany had stayed with the Deutsche Mark, the country’s export success would have been choked off by the rising value of its currency. Instead, the prices of German products on the international market are held down by the value of the Euro, which in turn is held down by the woes of the other member countries. German exhibitors weep crocodile tears for the hardships of the southern Europeans.
The final thing which helps German water technology companies is cost recovery tariffs. German water utilities tend to be part of Stadtwerke – city works organisations. These have a long tradition of operating in a fully commercial way. IFAT itself is evidence of this. It is owned by Messe München, which itself is part of the commercial arm of the city of Munich. If you have ever negotiated to take a stand at the show, you will know to your cost that it is a red-blooded capitalist organisation. German water utilities are the same. They are not constrained, like utilities in other countries, by politics and the availability of capital. They invest for performance, both financial and environmental. It is this, rather than the transient strength of the sludge processing market, the lack of international competition or the weakness of the Euro, which will guarantee the future of the German water technology sector long into the future.