The water shortage on a global scale is increasing the need for advanced water purification technology, specifically desalination. This presents an opportunity for Dow Chemical (NYSE:DOW), whose water & process solutions unit is the global leader in desalination technology research and development and is well-positioned to lead the growth in this industry in the future.
According to market research firm Global Water Intelligence, the desalination technologies market in the U.S. will grow at an annual rate of 20% over the next decade, driven by the growth in demand for technologies in oil, gas and shale industries in North America. 
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Although the desalination business has considerable potential for growth, there is still the need for research in order to improve viability through lower costs and increased efficiency. Dow Chemical is currently among the leaders in this domain. The company recently collaborated with the Saline Water Conversion Corporation (SWCC) in a research effort to test the viability of innovative desalination technology in the Arabian Gulf.
Dow water & process treatment unit is part of the coating and infrastructure solutions division of the company. Desalination equipment would command high margins due to the value added from cutting edge technology. We currently forecast margins for the division to remain around the 10% range during our forecast period. These forecasts could have a significant upside if there is a substantial rise in desalination equipment sales volumes.
We currently have a Trefis price estimate of $31 for Dow, which is in-line with the market price.Notes:
- Twenty percent growth in Desalination Technologies Market, Global Water Intelligence Press Release [↩]