Adventures in water heating

 

BY JOHN MESENBRINK,

chief editor

 

“Adventures” as in relating to the volatile economy. Consumer confidence is not exactly where is should be and some economic experts believe that, in time, the economy eventually will dig itself out of this recessive ravine, but not nearly replicative of some of the high times seen from the last half decade.

The fact is that the water heater industry still looks sluggish. “2010 is going to look a lot like 2009, with a slight uptick late 2010,” said Chuck Rohde, wholesale market manager, Rheem Water Heating.

 

The ever-so positive news is that according to the U.S. Census Bureau and the Department of Housing and Urban Development, June housing starts and building permits issued saw a slight increase — 8.7% building permits, 3.6% housing starts — from May revised numbers. However, the movement appears minute compared to last year’s numbers — down nearly 50% in both categories — but builders will take any good news when they see it.

 

So where do we go from here?

 

“The economy is certainly one of the most frequently discussed topics, but most contractors are taking advantage of this time by working with homeowners and facility managers to upgrade their systems instead of waiting for their next job to come to them. We have found that contractors who proactively seek out opportunities, and who do a fair job of selling ROI, are being successful,” said Sterling Boston, director of marketing, Lochinvar.

 

“Along with its partner representatives, distributors and contractors, we have all felt the burden of the economic crisis. The biggest concern we face collectively is from the global economy and the impact that it has on homeowner’s ability and desire to purchase new heating equipment,” said Todd Romig, vice president of sales and marketing, Heat Transfer Products.

 

A great reference point to get a pulse of the water heater industry is to examine shipment data. Every month, water heating shipment data released from the Air-Conditioning, Heating, and Refrigeration Institute (ahri) can be a good barometer of the water heating market. According to the latest ahri May shipment numbers, residential electric water heater shipments for May totaled 313,492, an 11.5% drop from the same month a year ago. Residential gas water heater shipments totaled 299,013, a 10.8% decrease compared with shipments for the same month last year. (See Figure 1.) For the year-to-date, about 1,603,970 residential gas water heaters have been shipped, a 7.4% drop compared with the same period a year ago. For the year-to-date, about 1,597,548 residential electric storage water heaters have been shipped, a 10.4% drop compared to the same period last year.

 

“Many experts were predicting a turn around in the economy in the 3rd or 4th quarter of 2009. I think any improvement will be minor, and probably not until 2010,” said Bruce Carnevale, vice president of sales and marketing, Bradford White.

Commercial numbers have declined more with commercial gas water heater shipments for May totaling 6,220, dropping 15% compared with the same month last year, while commercial electric water heater shipments totaling 4,691, an 18.9% drop compared with the same month a year ago. For the year-to-date, commercial electric water heater shipments (24,250) are 16.6% behind total shipments of this product during the same period last year (29,083). Commercial gas water heater shipments (34,011) for the year-to-date are down 12.8%, compared with the same period a year ago (38,999).

 

“Water heater unit sales will be the lowest we’ve seen in a number of years. The softening seems to have flattened out, but we don’t foresee a significant recovery in 2010. We see 2010 producing similar results to 2009 in terms of overall industry volume. Where the residential market seems to have bottomed out, we do not see a significant rebound in 2010. We also see a softening in the commercial market that will continue into 2010,” said David Chisolm, brand manager, A.O. Smith.

 

But not all news is doom and gloom. The high efficiency market will continue to grow as a percent of the overall market.

“Our concern is a combination of the weak economy, regarding the commercial market, and frustrations with new technology — there will be a continued push for higher efficiency products, this can only be done with more advanced technology,” said Chisolm.

 

The tax incentives on efficient water heaters gets mixed reviews on whether it will completely stem the tide. “2009 has not been spectacular for our industry as a whole, but with incentives such as the $1,500 Federal Tax Credit for homeowners to use for efficiency upgrades and stimulus money being pushed out on commercial work, there is definitely enough to keep us busy right now,” said Boston.

 

However, “While the tax incentives will help drive sales for some high efficiency products, I don’t believe they will overcome the lack of consumer confidence in spending. Consumers are investing in higher efficiency products, but there is also a trend toward more basic, lower cost options to heat water as well. We also see that consumers are more likely to repair equipment rather than replace it,” Carnevale added.

 

Although 2010 may forecast soft, it appears to be slowly getting better.

 

“All indications from the economists that we are listening to is that 2010 will start soft but should be heading back to normal by the 3rd quarter,” said Boston.

 

Although the forecast doesn’t look all too rosy for 2010, many manufacturers are clinging to the ideals of more efficient products and helping their customers any way they can. “I don’t foresee a lot of improvement in 2010. But, in times like these, sometimes you have to ‘make your own light at the end of the tunnel.’ The market is down, so we see it as our responsibility to provide our customers with the highest quality, most comprehensive product line available to them.  Some of our new products and technology will open new market niches for contractors – a good way to grow business for all of us,” said Carnevale.

 

High Efficiency — A new line of power direct vent (PDV), tank-type water heaters from Rheem Manufacturing Co., for example, is designed to meet the rigorous demands of today’s tightly constructed new homes that seek to maximize both energy savings and air quality. With an Energy Factor (EF) of 0.67, Rheem PDV Water Heaters exceed the new, phase one Energy Star criteria of 0.62 for water heaters, which the Department of Energy made effective on January 1.

A. O. Smith, State Water Heater and American Water Heater brands, for example, all have a comprehensive line of Energy Star®-rated water heaters. Likewise, the A. O. Smith Vertex line, the State Premier Power Vent line and the American Polaris line also qualify for the $1,500 Federal tax credit.