Is Plastic The New Iron for Water Utilities?

26 Jun 2017  |  Reese Tisdale

Pipe and hardware companies are poised to benefit from heightening concerns about U.S. municipal water infrastructure and $300 billion of forecasted capital expenditures over the next decade. Bluefield Research forecasts that new and replaced pipe and hardware infrastructure will make up more than 57% of municipal utilities’ total capital spend through 2026.

While the public does not want to think, or even know, about the 1.6 million miles of pipes underground, hundreds of thousands of water main breaks and lead-tainted water have begun to put a spotlight on this historically overlooked sector. Often considered a dubious metric by some industry insiders, the fact is that the average age of water pipes continues to climb– from 25 years in 1970 to 45 years in 2020– largely because of underinvestment. There are smarter solutions to better understanding the status of aging pipes, if only utilities and municipalities would take full advantage.

While municipal demand for pipe solutions, is expected to scale going forward, the pipe sector’s material profile, for water and wastewater, is also being reshaped. New spending on pipes is showing the strong preference by utilities and engineering firms for plastic pipes– PVC and HDPE– which account for US$97 billion of the ten-year total. This trend highlights the continued growth of these materials, largely because of cost.

A surge in hydraulic fracturing is only part of the reason. Increased innovation, including techniques to drill faster and generate more production at each well, are leading to shifts exponential improvements. This includes an almost 30% reduction in time to complete a well. At the same time, new suburban construction and tightening municipal budgets are tilting decision-makers toward plastics.

As pipe materials change, so does the highly fragmented supply chain. Companies are expanding their portfolios of pipe technologies and innovative solutions, and in some cases, entering new geographies to capitalize on growth. Leading players JM Eagle, Pipelife and North American Pipe, which are already ranked among the Top 10 suppliers by annual revenues, are positioned for growth.

At the same time, positive signals for increasing demand have sparked M&A activity. Bluefield has tracked 28 acquisitions of pipe companies, totaling US$6.3 billion, since the start of 2016. The most aggressive has been Forterra, a relative newcomer to the market, which has made nine deals over the last three years, placing it just on the outside of the top 10 leading players.

The scale of investment going into upgrading pipe networks is already driving more innovative, smarter solutions to stay ahead of rising costs. Over US$2.7 billion will be directed towards asset condition assessment and pipeline monitoring through 2026, while operating expenditures on leakage management, alone, will total $1 billion through the forecast period.

Replacing water pipes is extremely labor intensive and costly, so utilities will increasingly be forced to look for ways to squeeze costs with more cost-effective materials, installation techniques, such as trenchless technologies, and network analysis. Certainly adoption will take time but innovative solutions are in front of them.

Reese Tisdale is the President of Bluefield Research, a market research and insight firm focused exclusively on supporting companies addressing opportunities in water. Learn more about how Bluefield is helping companies make more informed decisions with data-backed intelligence.