The future of the boiler industry and the price and availability of steel were key among a wide range of topics covered during the 2007 American Boiler Manufacturers Association (ABMA) Manufacturers Conference Oct. 1-3 in Abilene, Texas.
In discussing his analysis of the North American commercial-, institutional-, and industrial-boiler markets, Sanjiv Bhaskar, a research manager in the area of environmental and building technology for research and consulting firm Frost & Sullivan, told the nearly 100 attendees to expect slow to moderate growth over the next five years.
Commercial and institutional boilers
In the commercial-and-institutional-boiler market, Bhaskar projected steady annual revenue growth of 3.9 percent through 2012. Shipments of 86,164 commercial and institutional boilers in 2006 generated revenue of $926.2 million, which is expected to grow to nearly $1.17 billion by 2012. Firetube boilers represent the bulk of the market.
Key drivers of the commercial-and-institutional-boiler market, Bhaskar said, are efficiency gains, advances in safety, and lower maintenance costs, all of which are causing a shift in demand from steam to hot-water boilers. Hot-water boilers represent 71 percent and steam boilers 29 percent of the commercial-and-institutional-boiler market, with the number of hot-water boilers expected to increase 75 percent by 2012, Bhaskar said.
Other drivers of the commercial-and-institutional-boiler market include new emissions standards, which are increasing demand for retrofit and replacement units; life-cycle costing, which is causing end users to invest in boilers instead of water heaters; and the growing number of multiple-boiler installations, Bhaskar said.
Obstacles facing the commercial-and-institutional-boiler market, Bhaskar said, include:
Price pressures on manufacturers.
Longer product life cycle and high replacement costs.
Inferior purchasing decisions resulting from a lack of product knowledge.
Bhaskar noted that while the continual greening of industry would appear to represent opportunities for boiler manufacturers, there are barriers to growth.
“Most states are slow in adopting energy-conservation codes,” Bhaskar said.
In the industrial-boiler market, Bhaskar projected declining growth in revenue through 2012. With estimated shipments of 2,628 units, the industrial-boiler market generated revenue of $254.4 million in 2006, which represented an increase of 3.5 percent compared with 2005. By 2012, Bhaskar expects revenue to increase to $282.5 million — an annual growth rate of only 1.6 percent.
Key drivers of the industrial-boiler market, according to Bhaskar, include:
High fuel costs and the availability of high-efficiency boilers.
“End users struggling with older boilers are encouraged by the potential savings to replace old equipment with new and more-efficient ones,” Bhaskar said.
More-efficient manufacturing processes.
The steadily increasing use of firetube boilers in manufacturing facilities.
Obstacles facing the industrial-boiler market, Bhaskar said, include:
High initial costs and cautious spending.
Weak enforcement of regulations and standards.
Market saturation and price sensitivity.
Boiler longevity and high replacement costs.
John Anton, principal of steel service for economic and financial analyst Global Insight, had good news for boiler manufacturers, predicting more-stable steel prices in 2008.
Anton said a key to accurately forecasting steel prices is inventory for the following six months. If inventory levels are high, prices will fall because supply, rather than demand, drives steel prices.
On the down side, Anton said, the U.S. dollar is weak, making Chinese and European steel more expensive.
“Steel prices and exchange rates lie on top of each other,” Anton said.
Demand for specialty steel, used in applications from power plants and refineries to pipelines and the aerospace industry, is “spectacularly strong,” Anton said.
Robert Gemmer, a technology manager in the Industrial Technologies Program of the U.S. Department of Energy (DOE), discussed a voluntary program called Plant Energy Certification Partnership Goal, which aims to cut energy intensity in industrial plants by 25 percent from 2007 levels by 2017 and to cut 8.4 quadrillion Btu per year. The program plans to have a third party in place to validate energy savings by the end of 2011.
“Engage your customers to participate in the program,” Gemmer urged the audience.
Gemmer also updated attendees on the DOE's Save Energy Now energy-assessment program. He said 200 assessments were conducted in 2006, resulting in the identification of more than $500 million in potential energy savings. As of August 2007, he said, 179 industrial plants had followed at least one of the program's recommendations.
Gemmer said that of the 250 energy assessments planned for 2007, 152 had been completed at the time of the conference. An estimated $66 million in energy-saving projects are under way, he said, with another $189 million in projects in the planning stage.
The conference included tours of local plants of Rentech Boiler Systems, Peerless Manufacturing, and Robinson Fans.