Abstract: With the increasingly severe problem of water scarcity and people's growing concern for the environment, the demand for water treatment agents continues to increase. In recent years, the market size of water treatment chemicals in China has shown a growing trend, with the market size increasing from 28.48 billion yuan in 2018 to 41.4 billion yuan in 2022, maintaining a stable growth trend.

1、 Definition and classification

Water treatment agents refer to chemicals added during the water treatment process to remove most harmful substances (such as corrosives, metal ions, dirt, and microorganisms) from water and obtain satisfactory domestic or industrial water. Water treatment agents are an important category of fine chemical products with strong specificity. Different water treatment agents are required for different usage purposes and treatment objects. Water treatment agents can be divided into corrosion inhibitors, dispersants, scale inhibitors, fungicides, coagulants, purifiers, cleaning agents, pre film agents, auxiliary agents, etc.

2、 Industry policies

The government supports the protection and utilization of water resources, and important policies are frequently introduced. Water scarcity is a bottleneck that restricts economic and social development. For every 1% increase in China's urbanization rate, urban domestic water consumption will increase by 1.67 billion cubic meters, which also stimulates the development of China's water treatment agent industry. In August 2022, the Ministry of Ecology and Environment and twelve other departments released the "Action Plan for the Battle of Yellow River Ecological Protection and Governance", which pointed out that in the Yellow River Basin, the proportion of concentrated drinking water sources in county-level and above cities that reach or exceed those in Sichuan Province shall not be less than 90%.

3、 Development History

The water treatment pharmaceutical industry in China has gone through three stages: introduction, absorption, and localization, innovation, research and industrialization, and complete industrialization. Technically speaking, the production technology and performance of some products have reached the international leading level. So far, there are over 100 types of water treatment products in China. Various water treatment agents have basically met domestic demand in terms of production and quality, and some products are exported.

4、 Industry barriers

1. Technological research and development barriers

The Chinese water treatment pharmaceutical industry has a high technological threshold, mainly reflected in research and development. Due to the involvement of various processes in water treatment, including precipitation, filtration, ion exchange, membrane separation, etc., enterprises need to possess profound knowledge in chemistry and engineering technology. Therefore, leading companies in the industry usually increase their investment in research and development, maintain technological innovation and continuous product updates, and this innovative ability forms a barrier for new entrants. If a new company wants to enter the market, it needs to invest a lot of resources in research and development to ensure the quality and performance of its products.

2. Regulatory barriers

The water treatment pharmaceutical industry is closely related to environmental policies, and the government's supervision of water quality is gradually increasing. Enterprises need to comply with a series of environmental regulations and standards to ensure the safety and environmental friendliness of their products. Enterprises that comply with these regulations can better adapt to market demand, but they also need to bear the related compliance costs. Compliance with environmental standards has become an important competitive advantage for companies in the industry, and also constitutes a barrier for new entrants as they need to spend time and resources adapting to these regulations.

3. Supply Chain and Cost Barriers

The raw materials of some water treatment agents have certain scarcity or exclusivity. If enterprises can effectively control the supply chain of raw materials, they will have strong market competitiveness. Cost advantage is also an aspect of industry barriers. Large scale production and procurement can reduce production costs, form economies of scale, and make it difficult for smaller enterprises to compete. To enter the market, a new enterprise not only needs to invest a large amount of capital to establish a production base, but also needs time to establish a stable supply chain.

4. Customer stickiness barrier

Some leading companies in the industry usually establish deep cooperative relationships with customers by providing comprehensive water treatment solutions and high-quality after-sales service, forming a high level of customer stickiness. Meanwhile, companies with high brand awareness can gain higher market share through brand premium. This poses challenges for new businesses entering the market, requiring significant investment in building brand image and providing services comparable to leading companies to attract and retain customers.

5、 Industrial chain

The water treatment agent industry chain is relatively clear, with raw material suppliers upstream, mainly composed of ferrous sulfate, ferric sulfate, polymeric iron salts, calcium hydroxide, PAM, ferric chloride, etc; The midstream of the industrial chain is water treatment agent production enterprises; The downstream of the industrial chain is the application field, mainly including chemical industry, light industry, metallurgy, construction, machinery, urban and rural environmental protection, etc.

6、 Industry Status

The development speed of China's water treatment agent industry is relatively fast, and a system of independent research and industrialization has been formed. The technical level and application service experience are increasingly improving and rich, which can meet the needs of various domestic water treatment markets; Complete categories and varieties of water treatment agents; The production of water treatment agents has reached a considerable scale, and both the output and quality can basically meet domestic demand. Some products are exported, and their international position is crucial; The production technology and performance of some products have reached the international leading level, but compared with the mature water treatment agent market abroad, there is still a significant gap in the overall water treatment agent market in China. Due to the growth of market demand and uneven technological levels of enterprises, the quality of some water treatment agent products cannot be guaranteed. In recent years, with the increasingly serious problem of water scarcity and people's increasing concern for the environment, the demand for water treatment agents has continued to increase. The market size of water treatment agents has risen from 28.48 billion yuan in 2018 to 41.4 billion yuan in 2022.

7、 Development factors

1. Favorable factors

(1) Environmental pressure increases

With the improvement of environmental awareness, the government has strengthened its supervision of water quality, and the demand for water treatment from enterprises and residents continues to increase. This provides a huge market opportunity for the water treatment pharmaceutical industry, where companies can meet market demand by providing efficient and environmentally friendly water treatment chemicals.

(2) The acceleration of urbanization process

The accelerated urbanization process in China has driven an increase in industrial and urban water consumption, resulting in a continuous expansion of demand in the field of water treatment. This has brought broad market space to the water treatment pharmaceutical industry, especially in industrial wastewater treatment and urban water supply.

(3) Technological innovation and R&D investment

Some companies have conducted extensive research and development in the field of water treatment agents, constantly introducing new technologies and products. Technological innovation has improved the overall level of the industry and also given enterprises with advanced technology a competitive advantage.

(4) Policy support

The Chinese government has been committed to strengthening environmental protection and water resource management, encouraging and regulating the development of the water treatment pharmaceutical industry through the release of relevant policies. This policy support contributes to the standardized development of the industry and also provides a more stable market environment for enterprises.

2. Adverse factors

(1) Fluctuations in raw material prices

The prices of raw materials required in the manufacturing process of water treatment agents fluctuate greatly, influenced by factors such as international markets and geopolitics. This poses certain uncertainties for enterprises in raw material procurement and cost control, increasing operational risks.

(2) Intense competition and price war

The competition in the industry is fierce, and some companies use price wars to gain market share, resulting in a decrease in product prices and a squeeze on profits. This poses a certain challenge to the profitability of enterprises, especially for smaller ones.

(3) Technical standards and certifications

There are multiple technical standards and certification systems in the industry, and companies need to spend a lot of resources to comply with and obtain relevant certifications. For new entrants, this increases the difficulty of entering the market and requires more time and capital investment.

(4) Uneven distribution of water resources

The distribution of water resources in China is uneven, with some regions having abundant water resources while others are relatively scarce. This presents different market opportunities and challenges for the water treatment pharmaceutical industry in different regions, requiring the development of flexible market strategies based on regional characteristics.

8、 Competitive landscape

In China, the main suppliers of water treatment agents are mostly small and medium-sized enterprises. Due to the relatively low technical threshold of water treatment agents, there are a large number of homogeneous products in the market. Therefore, the bargaining power of suppliers is relatively weak. However, for some special water treatment needs, suppliers with professional technical advantages have strong bargaining power. There are numerous enterprises in China's water treatment pharmaceutical industry, and the market concentration is relatively low. This has led to a high level of competition among competitors in the industry. Enterprises mainly compete through price competition, product differentiation, channel strategies, and other means. Due to the low technological threshold in the industry, new enterprises continue to enter, making competition even more intense. At present, the main leading enterprises in the industry are Henan Qingshuiyuan Technology Co., Ltd., Shandong Baomo Biochemical Co., Ltd., Shandong Taihe Technology Co., Ltd., Aisen (China) flocculant Co., Ltd., etc.

9、 Development Trends

In the field of industrial water treatment, developing phosphorus free or low phosphorus, non nitrogen, and biodegradable green water treatment agents suitable for environmental protection needs will become the most mainstream research direction. With the continuous improvement of industrial water treatment and environmental protection requirements, the variety of water treatment agents in China will continue to enrich, and their performance will also continue to improve. However, the quality of water treatment agents and formula products depends on whether users meet their needs within the established budget investment, rather than whether the latest products are selected. This has gradually become a consensus in the industry. In the past decade, the technology and process of water treatment agents have only made local breakthroughs, and new products are only used in specific occasions due to their high prices.