LAS VEGAS — While many educational sessions were presented at the Air-Conditioning, Heating, and Refrigeration (AHR) Expo, perhaps the most popular was the course on global HVAC trends offered by the Building Services Research and Information Association (BSRIA). The research organization, which specializes in international heating, air conditioning, renewables, and building controls markets, provided the results from its recent comprehensive analysis of current and future HVAC markets around the world. This is the second consecutive year BSRIA presented this information, and its findings were similar to last year with the exception of the global uncertainty surrounding Brexit and the election of President Donald Trump.

COOLING MARKETS

Last year was not a great year globally for the air conditioning market, but things are looking up, said Anette Holley, general manager of AC&R consultancy, BSRIA. “The Chinese market started to slow down in 2015, but in the second half of 2016, there was a boost due to warm weather and residential construction, which will improve the market’s outlook. The U.S. market fared really well over the last few years and that should continue. But, looking at the global market as a whole, there is some concern we are moving toward de-globalization with Brexit in Europe and indications from the Trump administration.”

After a slight recovery in the air conditioning market in 2014, the market dropped in 2015. Another drop is expected this year, although that may change with the improving Chinese market.

“We’ve seen recovery in the European market, the U.S. market has been holding up, and the Japanese and Korean markets are seeing growth as well,” said Holley. “Some of the worst performing a/c markets have been Brazil, Russia, and Saudi Arabia, and this will probably not change in the near future.”

Where the U.S. market is concerned, there has been a move toward integrating with international markets, as the production of air conditioning equipment has gravitated to countries where it is more economical to produce. This has primarily occurred in the rooftop and ducted splits markets while the chiller and central plant markets have remained in the U.S.

“We’re also seeing a move toward Asian players starting to establish themselves in the U.S. as they try to get a share of this giant market,” said Holley.

Looking ahead, it’s difficult to see where the air conditioning market in the U.S. is heading, said Holley, as there is much uncertainty surrounding the policies the Trump administration may implement.

“Companies like Carrier and Johnson Controls have been encouraged to keep plants in the U.S., and I’m sure we’ll see much more of this encouragement in the future — more of an inward focus. There is also some concern that there will be less focus on energy efficiency in the future.”

Another policy that could affect the U.S. market is the proposed taxation on imports. While President Trump seems to favor this approach, it could hamper the growth of ductless and variable refrigerant flow (VRF) systems, which have done particularly well in recent years, noted Holley.

“If this happens, the equipment will no longer be competitive in the market unless companies set up local manufacturing or partner with existing companies in the U.S.”

Residential mini-split systems, which are becoming more popular in the U.S., make up almost the entirety of the air conditioning markets in Asia, Europe, and Latin America. This market is expected to drop about 15 percent this year, even though the European market increased about 6 percent, said Holley.

“In the U.S., mini-split systems are still a niche market and tend to be used for dedicated residential applications," she said. "It was a really good year for multi splits in the U.S., primarily due to multifamily home construction.”

As for ducted split air conditioners, these systems are dominant in North American residential applications and currently account for about 70 percent of the market. Even though it is a mature market driven primarily by new construction, growth is expected this year in the U.S.

VRF systems are continuing to do well around the world, and sales are expected to increase 10 percent with China dominating the market. There has been an increase in market share of this equipment in the U.S. as well. The U.S. market is the fourth largest in the world with about 36,000 units sold in 2016.

“We’ve continued to see VRF growth in the U.S., but there is a danger of seeing it plateau unless suppliers find ways to remove barriers for growth, such as awareness, training, and widening of applications and regional scope,” said Holley. “VRF is a product that is quite regionalized on the East Coast, the West Coast, and in Texas.”

The chiller market continues to struggle as it depends heavily on new construction, which has not yet fully recovered.

“We see refurbishment picking up, but these projects are much more likely to use VRF instead,” said Holley. “This year, we are expecting a drop in the chiller market of about 3 percent, but, again, a lot of the drop is due to the Chinese market, which comprises 45 percent of the chiller market. The U.S. is the second biggest global chiller market with just more than $1 billion in sales. That market is doing fairly well, and an annual growth rate of 5 percent is expected through 2020.”

In summary, BSRIA expects the global air conditioning market to be slightly down this year, but that may change due to improving conditions in China. VRF sales will continue to be strong everywhere, but whether Asian-style products continue to do well in the U.S. may depend on if trade barriers are implemented.

“Overall, during the next three years, growth is expected from the U.S. and Southeast Asia while the Chinese market will continue to struggle,” said Holley.

HEATING MARKETS

In the heating market, sales of residential boilers have been declining in North America and Europe, but there has been quite a bit of growth in the Chinese market.

“The growth of boilers in China is matched by the growth of heat pumps there, and more growth is expected in the years to come,” said Krystyna Dawson, business manager, BSRIA. “Solar thermal systems have exhibited strong sales in China due to an increased focus on green technologies and renewables.”

The European market is by far the largest market in the world for boilers, but sales there decreased in 2016. That sales dip is likely a response to legislation introduced by the European Union in 2015, which enforced sales of condensing boilers. Prior to that, the market grew rapidly as many Europeans raced to purchase less efficient boilers before the legislation was passed.

Heat pumps account for a very small part of the heating market around the world, but sales are growing, particularly in Europe. Solar thermal sales in Europe have stagnated, mainly due to the increasing popularity of photovoltaic systems, which are heavily subsidized by various governments.

“It’s a similar situation in the U.S., where solar thermal systems are not as popular due to the disruption of photovoltaic,” said Dawson. “But this may change as the government has maintained incentives for the solar thermal market while incentives for geothermal heat pumps stopped at the end of 2016.”

Speaking of which, sales of geothermal heat pumps have been growing slowly, but because of the cessation of incentives from the government, the U.S. market is expected to flatten in the years to come.

In the U.S., the heating market is dominated by furnaces, and hydronic boilers account for just 7 percent of the market. Furnace growth is expected to continue in the years to come, said Dawson, while the picture is not as positive for floor-standing boilers.

“Until now, floor-standing models dominated the U.S. boiler market, and while wall-hung boilers are becoming more popular, sales last year showed only a 3 percent growth compared to the 6 percent that was expected. Wall-hung boilers were only introduced to North America about five years ago, but they already account for 34 percent of the market, and nearly all condensing models are wall-hung.”

Smart products that give consumers the power to control their own use of electricity are in demand.

“Smart, connected HVAC is coming, and it is likely to be big,” said Dawson. “Now, will product manufacturers be able to maintain their strong positions in this new, very challenging, and unknown future?”

For more information on corporate business opportunities in USA and the Americas market, contact Raphael Chalogany, general manager, BSRIA Inc.,
at 312-753-6801 or raphael.chalogany@bsria.com.

Publication date: 3/27/2017

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