With the United States and much of the world mired in a recession, it is no surprise that many industrial- and commercial/institutional-boiler manufacturers are expecting tough times in 2009. How tough is anyone's guess.
According to a survey conducted by the American Boiler Manufacturers Association (ABMA), the full impact of the recession may not have hit the boiler industry yet, thanks to a healthy backlog of orders being filled.
But the outlook for the boiler industry for 2009 is clouded by what appears to be a slowing of new orders attributed in large part to the credit and financial situation. Of the industrial-boiler companies that responded to the survey, 56 percent said they expect a downturn in business in 2009, but could not project how great it will be. Another 13 percent said because of uncertain economic conditions, they could not predict how business will be in 2009.
The outlook for 2009 appears somewhat better for commercial/institutional-boiler companies. Nearly 40 percent of those that responded to the survey said they expect a downturn in business this year, with another 12 percent saying they are unable to predict because of economic conditions.
Asked what “scares” them most when looking ahead to 2009-2010, industrial-boiler manufacturers said the prospects of a continued credit crunch, which would delay capital-improvement projects because customers often need to borrow money to grow their businesses.
Fifty-six percent of the industrial-boiler companies that responded to the survey reported the current credit and financial crisis has resulted in the cancellation or postponement of projects on which they bid, while 19 percent of the industrial-boiler companies that responded reported the financial situation has resulted in the cancellation or postponement of projects in which they were actively involved.
Industrial-boiler companies reported being concerned customers will repair, rather than replace, equipment or be late with payments, while both industrial- and commercial/institutional-boiler companies cited concern about a possible influx of regulations or taxes this year because of the Democratic Party being in the White House and controlling Congress.
Like their industrial counterparts, commercial/institutional-boiler manufacturers said they fear the down economy will prevent new projects and construction from moving forward, with some expressing fear new orders will stop abruptly, as they did in the automobile industry. Twelve percent of the commercial/institutional-boiler companies that responded to the survey reported the financial crisis has caused the cancellation or postponement of projects on which they bid, while 63 percent said the financial crisis resulted in the cancellation or postponement of projects in which they were involved.
Despite these troubles, 25 percent of the industrial-boiler manufacturers that responded said they either are positioned to be unaffected by the economic downturn or will be OK given drivers in their market segment. Among the commercial/institutional-boiler companies that responded, 12 percent said they will be OK in 2009, 12 percent said they are OK but unsettled going into the new year, and 25 percent said business will be flat or possibly down slightly from 2008.
Asked to name three developments likely to have a positive impact on business in 2009, both the industrial- and commercial/institutional-boiler segments named high energy costs, demand for high-efficiency boilers, and a stabilization or possible decline in the cost of raw materials.