Different consulting outfits have determined that by 2025 two-thirds of the global population will experience water stress. A shortage situation always breeds investment opportunities; in this case we see potential for different aspects of water infrastructures. Positive prospects will open up in utilities, power generation, desalination of sea water and in manufacturing of pumps, valves, and electronics needed to move the liquid commodity.
The global water market is already a significant part of the global economy with revenues in excess of $500 billion a year. As of 2010, the breakdown of revenues was as such (source: Fortune):
- $396 billion from Utilities ($226 billion in water services and $170 billion in waste water)
- $59 billion in bottled water
- $28 billion in water equipment and services supplied to various businesses
- $10 billion agricultural irrigation
- $15 billion filters and various heating and cooling systems.
Many of the inefficiencies of the water market are also a function of mispricing; the following are some example of how much 100 gallons of tap water are priced around the world:
- Buenos Aires: $0.01
- Mumbai: $0.04
- Shanghai: $0.07
- Mexico City: $0.13
- Hong Kong: $0.17
- Moscow: $0.24
- Las Vegas: $0.32
- New York: $0.39
- Tokyo: $0.46
- Los Angeles: $0.50
- Phoenix: $0.59
- London: $0.73
- Oslo: $1.35
- Paris: $1.48
- Copenhagen: $3.03
Water usage varies dramatically from country to country but the trend over the long term is converging; Americans use approximately 150 gallons of water per day, while the Chinese use only 23 gallons but growing. India, for instance, expects their water needs to double in the next ten years. Globally, 71% of water consumption is dedicated to agriculture, while 16% goes to industry.
“Beating the Coming Water Shortage” a report by Fortune, highlights the average quantities of water required to manufacture simple everyday items:
- Cup of coffee: 71 gallons
- Pair of jeans: 2906 gallons
- A prime steak: 1857 gallons
- A car: 104,000 gallons.
At THALASSA CAPITAL LLC we are determined to position ourselves ahead of the curve and have built a long term investing framework designed to capture such opportunities. We utilize a Core-Satellite approach which comprises low cost ETFs at the core and a mix of individual investments in specific niches of water treatment. This approach allows us to mix traditional utilities with industrial companies and high tech hubs. We also favor a global approach since, as we mentioned earlier, water scarcity has no boundaries.
Please contact our investment team for more information on this portfolio.