HWT: Hazardous Waste Treatment
Sludge Treatment (by product of WWT)
WTE: Waste to energy (by product of WWT is used to generate electricity)
According to Uob Kayhian (Jan, 2017), the WWT market is quite mature in bigger cities. The WWT industry in counties has developed faster than expected in the 12th FYP period, with the treatment ratio reaching 85%, exceeded its target of 70% in 2015. However, the ratio is still low in towns. The 12th FYP targeted a 30% treatment ratio and the 13th FYP targets to aggressively raise the ratio to 70%. In less developed regions, such as the central and west regions, the ratio should reach 50%. Therefore, going forward, Uob Kayhian thinks that the WWT will focus on towns and villages, which are now lagging behind in terms of treatment ratio.
Further, Uob Kayhian reported that the treatment of sludge, which is mainly the byproduct from WWT, has been largely overlooked in the past five years. So far, most of the sludge is buried after dewatering. However, this is not a good solution as all the pollutant content still exists, suggesting high possibility of a second round of pollution to soil and rivers. Over the next few years, the government would focus on the conversion of sludge into other useful materials, depending on the type of sludge. Hence, there are opportunities in the sludge treatment area.
Overview of Hazardous Waste Situation
The Hazardous Waste Management industry in China is engaged in the collection, storage, utilization, and disposal of hazardous waste. According to ResearchInChina, China is a big producer of industrial hazardous waste, which arise from electronic circuit board production, oil & gas and chemical production processes. It was estimated that China produced 40 million tons of industrial hazardous waste in 2013, representing an increase of 15.4 % over the previous year. By 2016, China will create 70 million tons of hazardous waste. However, as of 2013, Chinese licensed companies could only treat 50 %-60% of hazardous waste. With the country attaches more importance to environmental issues, laws and regulations are enforced more and more stringently, the utilization and disposal rates of hazardous waste will be to some extent raised, and the hazardous waste treatment industry will embrace huge potentials.
The Ministry of Environmental Protection (MEP), National Development and Reform Commission (NDRC), and Ministry of Public Security (MPS) jointly released the National List of Hazardous Waste (2016 edition), effective 1 August 2016.
The updated List reclassifies hazardous waste into 46 categories. Out of the 479 items on the List, 117 are newly added.
While there are hundreds of enterprises in Beijing, Jiangsu, Zhejiang, Guangdong, Henan, and Tianjin that engage in the front line of hazardous waste treatment, most of the capacities are idle due to scarce policy support of the local government and low efficiency of garbage collection (ReportsmReports, 2014). Companies with government support in the collection of the hazardous waste will have huge growth opportunity in this area.
Technology Barrier
Compared to municipal waste water, it is more difficult to treat industrial wastewater as its chemical composition is more complex. As industrial wastewater is often toxic, the wastewater treatment system must be designed to largely remove or substantially reduce the concentration of these effluents to an acceptable level as required under environmental protection and public health laws and regulations.
Sludge is the by-product resulting from wastewater treatment and contains a large amount of nitrogen, phosphorus, potassium and organic ingredients as well as toxic and harmful components such as dioxins. Sludge treatment is a complicated process. Only less than 30% of wastewater treatment plants in cities in China can properly compress, stabilize and dehydrate sludge. According to the data collected by Ernst & Young in 2013, over 56% of wastewater treatment plants do not have stabilization treatment and nearly 49% do not have a dehydration process. Only operators with industrial solid waste certificates under the operation certificate of environmental pollution treatment facility are allowed to conduct sludge treatment business.
Hazardous waste treatment requires the most advanced technology and specified treatment process is required for each type of waste.
Overall Assessment of Waste Water & Hazardous Waste Sector:
Source: Stock Sniper
Competition
The Water & WWT industry is a highly competitive and fragmented market in China. The main players are the State-Owned- Enterprises (e.g. Beijing Enterprises Water, Beijing Capital, Shanghai Industrial, Tianjin Capital Environment) and local private companies (China Water, Kangda, Sound Group) as well as a number of international environmental services companies (Suez Environement, Veolia Environment).
However, foreign companies are increasingly finding it difficult to compete with the local companies in the WWT, except for segments that requires more advanced technology.
The WWT companies compete on financial strengths, project execution capability, research and development capability, understanding of the local governmental landscape, quality and price of wastewater treatment and industrial water supply services, brand reputation, marketing and customer services.
The wastewater treatment industry is capital intensive. It is generally easier for medium to large players with good financial strength to win bids for wastewater treatment projects, as they are able to afford the start-up cost and can obtain financing from banks or the government more easily.
In municipal wastewater projects, relationships with the local government play a vital role in winning the tender as well as in subsequent operations. A good relationship with the local government often enables a player to better understand the government’s requirements, and hence a higher chance to win the contract.
In 2017, up to May, there are two new IPOs, namely Luzhou Xinlu Water Group and Kunming Dianchi Water Treat which were listed in HKSE.
Source: Stock Sniper
1Engineering, Procurement and Construction (EPC) service provision to 3rd party as part of its core business)
Comparison of WWT Companies Listed in SGX, SSE & HKEx
Data Source: Morningstar, Annual reports
Coming soon... Next, we will be looking at a few of the listed companies above operating in the China's Waste Water Sector.. Click HERE To Subscribe For New Updates by Email