4 Commodities Ready To Shock Investors – #2: Water Costs To Surge On Regulations, Infrastructure
Posted: July 22, 2008
As if the oil price shock that has thrown the world into turmoil isn’t bad enough, there’s reason to believe at least four more commodity price shocks may be headed straight for investors’ portfolios.
Next up: water, which while it isn’t a traded commodity, is facing cost issues that are expected to send rates soaring, raising global food prices even higher while denting the performance of every business that relies on water and putting added pressure on already-beleaguered consumers.
The problem with water is twofold. In the U.S. new federal water safety regulations, some taking effect next year, will add to costs that water utilities will pass through to every end-user. Meanwhile, globally, just as a lack of investment in oil infrastructure has helped create today’s supply crisis, lack of investment in water infrastructure is slowly doing the same with a commodity for which, unlike oil, there is no substitute.
“Current estimates indicate that we will not have enough water to feed ourselves in 25 years time, by when the current food crisis may turn into a perpetual crisis. . . . (S)ignificant investment in both R&D and water infrastructure development are needed, if dire consequences are to be avoided,” according to the International Water Management Institute in Sri Lanka. The institute recommends such costly changes as building new dams, redesigning irrigation systems, developing drought-tolerant crops, and building more wastewater treatment facilities.
The takeaway here for investors is that water is going to become more expensive – maybe a lot more expensive – and while every investor’s portfolio (not to mention his pocketbook) may suffer, there are a number of water-related companies that may prosper. They’re not easy to find, according to Rafael Coven, who recently spent a lot of time scouring the world for publicly-traded water-related companies for the stock index of “clean technology” companies he manages.
One company now in Coven’s Cleantech Index is Kurita Water Industries Ltd., a Japanese firm trading on the Tokyo exchange that provides water and wastewater treatment services. The company provides drinking water treatment equipment, desalination plants, groundwater remediation systems, and more.
Another company in the Coven-managed index that investors may find intriguing is Christ Water Technology AG, an Austrian company that trades in Vienna, whose water treatment services span a wide range of industries, from pharmaceuticals and biotechnology to power plants. Christ Water recently said it expects EBIT in 2008 to be double 2007.
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