The world water market will grow twice as fast as oil between now and 2030, but traders
looking to branch out into the potentially lucrative business of moving water to where it will be needed the most will face massive challenges getting into the space, according to experts at a special seminar organised for Singapore International Water Week.
Supply of essential commodities like electricity and water are seen by many as human rights issues to be tackled by governments, rather than price-driven conundrums to be tackled by free markets. Dealing in such commodities can arouse more suspicion than excitement in the public imagination.
But can water keep the traders out for ever? Seems unlikely if there’s supply/demand imbalances to be taken care of, and money to be made from doing so.
CLSA Asia Pacific Markets, one of Asia’s biggest equity brokers, estimates that total world water demand will hit 6.9 trillion cubic m/year by 2030, equivalent to 119 billion barrels of daily demand.
At those levels, water demand will have surged by around 53% from this year, according to CLSA research. The total water market would by then be more than a thousand times larger than the oil market, measured by volume. The US’ Energy Information Administration recently estimated will have reached 107 million b/d of consumption by 2030, some 24% bigger than today.
Ed Slade, director of investment banking at CLSA, told a water seminar organised by Singapore Exchange that the biggest opportunities in the water market would come not from trading, but rather from the huge investments that are likely to be made in building water pipelines, reservoirs and treatment plants.
There will be gaps in some countries’ ability to meet their own water demand, but speakers at the seminar generally gave a cold shoulder to the ability of trade to help move water from plentiful places to countries that might otherwise run dry.
“Water is not being traded. There are some attempts at trading water rights,” said Sam Ong, chief financial office with Singapore-listed water giant Hyflux. The company was, somewhat ironically, founded as a trading company called Hydrochem in 1989.
Ong said problems with physical delivery of water, as well as complex legal issues surrounding sovereign claims to water rights, had complicated efforts to trade water — though he advocated for the creation of a market trading in “water footprints,” along the broad lines of emissions trading schemes that have been developed around the world to provide economic
incentives to reduce emissions.
A market in water footprints, which could provide similar cash incentives to reduce water consumption, “should be part and parcel of what we do,” said Ong.
A tour around the stands on display at Singapore International Water Week suggested that most in the industry are on the side of state-endorsed, project-based solutions. Of the 100 or more stalls displaying various services in the water sector, all but a few were offering water infrastructure solutions.