BY ROBERT P. MADER
OF CONTRACTOR'S STAFF
SALES AND SHIPMENTS in the hydronic heating market should increase in the low single digits in 2007, manufacturers said. Sales of tubing, boilers and accessories into the radiant heating market should increase between 10% and 15%.
The manufacturers told CONTRACTOR they were taken by surprise by how much the slowdown in housing affected business in 2006.
"We didn't respect the overall effect the housing market would have on our industry this year," said Dave Dolan, vice president/marketing for Weil-McLain, echoing the thoughts of many of his peers.
Nevertheless, while housing has fallen from record high levels, new residential construction is still "decent," said Dave Martin, president of Heat Transfer Products, maker of the Munchkin boiler.
Is the end of the housing slump in sight? Dolan optimistically noted that sales of new homes rose in November 2006 by 3.4%, and the median price was up to $257,000.
On the other hand, Ken St. Thomas, manager of marketing analysis for A.O. Smith and State Water Heaters, said that according to the latest data, completions have outpaced housing starts. Once completions catch up with the lower starts figure in the first half of this year, he said, sales could take a hit.
"There will be a continued slump in new housing that will hurt the radiant business, but the construction of highend homes driven by progressive baby boomers and remodeling of existing homes will give new business to both hydronic and electric radiant systems," said Dan Chiles, vice president of Watts Radiant.
Joel Culp, vice president of offerings/marketing for tubing maker Uponor, noted: "Despite construction market projections for continued slowing in housing month after month that's worse than we all expected, we don't believe that means diminished market opportunities for us. Looking at heating, we believe there is relatively unlimited growth potential for radiant floor heating and cooling in all segments of the market — new construction, remodeling and commercial."
Bradford White expects housing to contract in 2007 and 2008, Executive Vice President Vic Giuffre said.
"California and coastal areas on both the East and West will have contraction in housing market," he said. "The inventory of available homes is over 71⁄2 months now."
Metro areas with strong employment and moderate costs such as Nashville, Tenn.; Raleigh, N.C.; Oklahoma City; Columbus, Ohio; Austin, Texas; Atlanta; and Charlotte, N.C., will not slow down as much, Giuffre said. Cities that depend on heavy manufacturing will suffer.
In contrast, the commercial market, which lags residential construction, is expected to tally increases.
"The percentage increases in the commercial boiler market will be higher than in the commercial water heater market," said Mike Lahti, vice president/sales for Lochinvar.
Institutional work, federal government jobs and car washes will do well, he said. Motels, especially in the 50-to-80-room category, will be off.
Giuffre foresees good business in restaurants, condos, penitentiaries and hospitals. He noted that the Delaware/Pennsylvania/South Jersey area near Bradford White headquarters has $10 billion on the books in commercial construction for next few years.
Weil-McLain is devoting R&D resources to the 400,000-to-500,000Btuh size range for commercial applications, Dolan said, with its Ultra condensing technology, and it's tweaking its cast-iron line for additional efficiency. He and other manufacturers noted that high-efficiency condensing boilers are becoming a more important part of sales.
"I'm not going to waiver off a statement I made last year that we'll see one in every four hydronic platforms being high efficiency, meaning 90% or above," Dolan said. "I don't see that de-escalating in 2006. I'm confident 25% will be 90% or above."
"The traditional cast-iron market continues to decline while high efficiency continues to increase," Heat Transfer Products' Martin said. "The cast-iron market is down around 10% and high efficiency is up more than that."
Martin said he is even seeing activity in the solar thermal market. While the trend toward higher efficiency and condensing products is taking hold residentially, manufacturers are not in total agreement about whether "green" housing will be a near- or long-term trend.
Chiles said: "Consumers and especially specifiers will focus on sustainable or green systems. Look for a Democratic Congress and Senate to revive energy credits, and mechanical systems will get their share. The likelihood of carbon taxes will increase with pressure from Europe, and domestic HVAC systems will face increased pressure to improve energy performance to reduce the impact of these fees."
Specifiers and contractors will look for more packaged mechanical solutions, as energy-efficient design becomes more complex, Chiles said. Simple radiant system design will be replaced by hybrid designs that incorporate blends of the latest in solar, biofuel, geothermal, radiant and heat recovery technology. These integrated systems will require better valves, better controls and better installers, he added.
Even better would be making hydronic systems more "plug-and-play," Dolan said, so a "contractor doesn't have to think about building the house around the heating source."
Manufacturers have to find ways to simplify the installation of radiant floor-heating systems to move them into mid-level housing, said Uponor's Culp, and stop depending on the semicustom and custom-home market.
"There's an opportunity to reinvent this category," Culp said. "The industry has relied on traditional hydronic markets and luxury homes. We need to expand the walls of the market."
The way to do that is with increased education of consumers, specifiers and home builders that wish to differentiate themselves. The payoff from that, however, Culp said, will be in 2008 or 2009, not this year.