Chinese Air Pollution Control Expenditures To Reshape Multiple Industries


Source: The McIlvaine Company

The Chinese investment in new air pollution control equipment in the next ten years will not only reshape the air pollution industry but will also reshape the industries supplying components such as dampers, fans, expansion joints, fabricated alloy structures, monitors, and optimization software.

China will buy more SO2 scrubbers and NOx control systems than any other country and, in fact, any other continent over the next ten years. Chinese cement and steel companies will also spend more than any of their counterparts in other countries.

Power plants in China will invest more than $4 billion/yr for new air pollution control systems over the next decade. This is the aggregate of forecasts from four McIlvaine online market reports covering particulate, NOx and SO2 reduction. These forecasts are based on Chinese prices which are far less than those in the U.S. Therefore the relative demand inpact in units and tons is considerably greater.

The industry will be reshaped in a number of ways predicts McIlvaine. First some international companies will gain strength over their competitors through successful entry into the Chinese market. Some companies are already taking advantage of the manufacturing cost advantages in the country. They will increasingly utilize China as a base of international operations.

Secondly, Chinese companies will acquire international companies and become major participants in the industry. One example is the recent purchase of a German catalyst company by a Chinese power company subsidiary. It plans to move the catalyst manufacturing equipment to China.

Thirdly, new technologies will more quickly obsolesce older ones. The large new markets in China and the willingness of Chinese purchasers to embrace new technology will result in more rapid adoption of the new technology. Several U.S. and Japanese companies have installed their newest technology in China before introducing it at home.

China is also committing itself to increased R&D expenditures with the express purpose of developing home grown technology. China will benefit from having the most and the newest systems in operation. Several Chinese air pollution control companies already rank among the world’s largest. Chinese precipitator manufacturers build more precipitators than all their competitors combined.

Chinese licensees of flue gas desulfurization systems are gaining so much experience that within a few years they will have built as many systems as have their licensors. This could result either well or badly. If the licensees elect to become competitors with the licensors, the industry will suffer substantial losses. This is what happened in Germany in the 1980s.

On the other hand, if the industry becomes truly international and some of the licensees become acquirers and international participants and some of the licensors become acquirers and directly deal on the Chinese mainland, then the present high profit percentages will be maintained.

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