When looking back at the domestic and commercial boiler market in 2020, we can see how the overall heating industry – worth some €40 Bill – fell sharply due to the impact of the Covid-19 pandemic. Across the world we saw lockdowns which impacted on construction, and redundancies which diminished purchasing power. We saw heating manufacturers trying to conserve cash, wholesalers reducing their inventories, installers staying away from work, and supply chains interrupted. The cost of components, transport and labour went up, but prices of boilers have generally stayed level.
However, markets have been impacted in different ways. On the residential side, people spent more time at home and have increasingly been working from home; in many cases they spent less money and, sometimes aided by country incentives, invested more in their homes, which has benefitted the domestic heating industry. However, growth and recovery in 2021-2022 varies significantly by country.
China, for example, is by far the largest heating market in the world, but very volatile and challenging to forecast. China was the only major economy to grow in 2020 but ended up having its weakest GDP growth for nearly 30 years. The domestic boilers market was heavily affected in the first four months of 2020, but it was also the first market to recover and rather well.
There are huge differences between condensing and non-condensing boiler sales behaviours. They are all linked to the three very distinct aspects of the market (i.e. retail, new build, “coal-to-clean”) and in turn depend to varying degrees on government support, the policies that drive these markets and the building regulations – or lack of them, as is the case for national regulations to convert into condensing boilers, and of course the price of natural gas. China is a heavily policy-driven market.
Italy is the largest manufacturing base for heating components in Europe. It is also one of the hardest to be hit by COVID – which has caused a severe economic recession – as Italy was the first European country to impose strict lockdown measures, paralysing economic activity from March to June 2020. The economy started to recover in subsequent months and is now driven by government spending programmes, alongside the EU recovery fund, but it may nevertheless still take longer to fully recover. Significantly, existing incentives were improved to make payments easier to access, more upfront, or earlier to pay.
The North America market is very different and has a unique heating market, with a huge furnace market linked to the domestic ducted air conditioning market. This has been a stable, steady, unspectacular boiler market for some years. However, with elections now out of the way there is a lot of discussion on the “Green New Deal” and other good intentions from the new administration.
Meanwhile, there are some quite radical state policies coming from California on the electrification of heating and we see big manufacturers scrambling to see exactly how this will affect them. Certainly, there is more scope for change. In terms of recovery, it is doing well in areas like house finances, but there are question marks on unemployment and how it will impact the heating market, which is heavily reliant on replacement and the ability to afford a newer, more efficient boilers.
Ultimately Covid-19 is only one of the challenges that the heating industry is facing, alongside the climate crisis and net-zero targets, urbanisation, adoption of greener gas solutions, increasing demand for electricity, integration of HVAC solutions and servitisation, to name a few, which create challenges and opportunities and will certainly cast a very different landscape by 2030.
Fig 1: Top-6 heating markets in 2020
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