Hydronic Heating Market Expects Moderate Growth

BY ROBERT P. MADER Of CONTRACTORs staff LETS BE cautious and say that the hydronic market is going to be up in the mid single digits, 5% or 6%. Then we can be happy if its better. The problem with forecasting the hydronic heating market is that it fooled the experts in 2003. The manufacturers turned in their shipment predictions to Gas Appliance Manufacturers Association, and actual shipments last

BY ROBERT P. MADER

Of CONTRACTOR’s staff

LET’S BE cautious and say that the hydronic market is going to be up in the mid single digits, 5% or 6%. Then we can be happy if it’s better.

The problem with forecasting the hydronic heating market is that it fooled the experts in 2003. The manufacturers turned in their shipment predictions to Gas Appliance Manufacturers Association, and actual shipments last year beat everybody’s forecast.

“When they forecast 2003, the industry results exceeded even the highest of the industry forecasts, so it was a very good year and nobody knows exactly why it happened,” said Dick Thompson, vice president/sales for Slant/Fin. He noted that baseboard sales had increased by double digits in 2003.

Slant/Fin is forecasting 6% growth for 2004, Thompson said. He noted that the company does not expect the market to slow until 2005.

“It wouldn’t surprise me if it’s flat or plus or minus two points because this year [2003] was a big year for the boiler business,” said Pete Morgan of Peerless Boilers. “We haven’t seen a year like this since 1994, so the chances of it happening again, statistically speaking, are not great.”

Housing starts for 2003 were really good, said Uponor Wirsbo President Joe Pauley, who noted that Wirsbo added some new products, which spurred sales. Wirsbo enjoyed an increase that was well into double digits, he said.

“We expect about the same for 2004,” Pauley said. “I’ve been going through the forecast from [the National Association of Home Builders] for next year, and they are expecting modest slowdowns in single- and multifamily housing for next year, but not by a material amount. It’s probably within the standard deviation for what they consider correct.”

“If nobody knows why 2003 was so strong, they probably don’t know why 2004 can’t be just as strong,” said Mike Chiles, president and general manager of Watts Radiant. “That’s a little flippant, but maybe it indicates that the market is expanding beyond traditional hydronic tradespeople.”

Chiles also believes a double-digit increase is reasonable for 2004. Chiles pointed out that the industry would ship about 250 million lineal ft. of tubing in 2003. A 10% growth, or 25 million ft., would be enough to outfit 10,000 typical houses, which is not an unrealistic number, considering that NAHB is forecasting 1.45 million new starts this year.

Both Chiles and Radiant Panel Association Executive Director Lawrence Drake are believers that the hydronic and radiant markets need to expand to HVAC contractors.

Chiles noted that in traditional hydronic markets, such as the Northeast, radiant has replaced some baseboard, fan coil and kick space heaters. Radiant has altered sales of hydronic distribution equipment but it hasn’t resulted in increased boiler sales.

Thompson said that radiant installations in large custom homes have resulted in a net gain for the market because those houses would have been all forced air if not for radiant.

The brand new market for radiant, Chiles said, is in places such as the Midwest with combination systems. If an HVAC contractor can install radiant heat in a basement, Chiles noted, it allows him to introduce both himself and his customers to radiant heat without needing the expertise of some of RPA’s leading contractors. Electric radiant floor-warming systems could be another easy entrée for HVAC contractors into the radiant market.

Radiant has brought out the creativity of some of the industry’s leading contractors, Drake noted, but that creativity has led to custom installations in every house and serviceability issues down the road.

“We need to make it easier for contractors to get involved in putting in technically advanced systems without having to have all that design knowledge — if it’s put in the box for them,” Drake said. “So hopefully we’ll end up with better-designed and easier-to-maintain systems and there will be an incentive for more mechanical contractors to get involved.”

On the commercial side, business is expected to increase as well, said Ike Gatlin, boiler project manager for Lochinvar. Gatlin said his firm is projecting a 6% to 10% increase in copper tube boiler shipments. The only negative is that Lochinvar always tries to get high-efficiency equipment specified, but it frequently gets “value engineered” down to 85%.

“A lot of the time building owners are so cost conscious that that’s one of first things to get lost,” Gatlin noted.

He said the federal government has set a goal of reducing energy usage in federal buildings by 35% by the year 2010. Contractors might see increased volume from the retrofit initiative.