Environmental EPCs Will Spend Over $60 Billion This Year
Engineering, Procurement and Construction (EPC) contractors of environmental and contamination control systems will spend more than $60 billion in 2007 for components and services. Recipients of these purchase orders are the original equipment manufacturers (OEMs). They will in turn spend $40 billion for components and services. Information on more than 10,000 of these companies is supplied in the McIlvaine online OEM Networking Directory. While these 10,000 companies represent only 10 percent of an estimated 70,000 companies which purchase environmental components or services, they represent more than 90 percent of the total purchases.
EPC contractors supplying filtration and separation systems used in processing water and wastewater will spend $25 billion this year for tanks, pumps, valves, instrumentation and other components and services for the systems they install. Siemens and GE will each purchase components and services valued at more than $500 million. There are more than 40,000 other companies around the world with purchases ranging from more than $100 million to less than $1 million/yr.
Suppliers of air pollution control systems will spend more than $20 billion for system components and services. In fact, system supplier purchases equal more than 80 percent of revenues. Alstom and Babcock & Wilcox each have scrubber system backlogs of approximately $1 billion. Their biggest purchases will be for fabrications including scrubber vessels, ductworks and tanks. Individual purchases can be as much as $30 million for fabrication and erection of major components.
More than $1.5 billion will be spent to purchase components by suppliers of ultrapure water systems. These are systems sold to power, semiconductor and pharmaceutical companies.
The ultrapure air systems utilized in cleanrooms are often supplied by large engineering firms as opposed to the turn-key system suppliers. Purchases of components and services for the semiconductor, pharmaceutical, flat panel display and other cleanrooms will be more than $1 billion this year.
There is a whole chain of purchases in a typical system installation. A large power plant scrubber system is a good example. The system supplier such as Mitsubishi will buy a pump from a company such as Weir. Weir in turn will buy castings from a foundry.
There are relatively few system suppliers. However, there are many component suppliers and even more service suppliers. Companies selling to the bottom of the chain will have many potential customers but relatively small average unit sales. At the top of the chain individual orders can exceed $200 million and unit sales will be small.
The OEM Networking Directory provides contacts for people in a number of different departments. At the bottom end of the chain, the purchasing decision may be made by a single person such as the purchasing agent. At the top of the chain, the final decision may be the result of input from dozens of people.
There is also a timing distinction in the purchasing chain. At the bottom of the chain, there is a short-lead time between the initial sales negotiation and the purchase. At the top of the chain, negotiations and important decisions can be made years in advance of the final sale.