Within a billion dollars. Litvinchuk Marketing’s review of the water heating systems market

The market for water heating systems can be represented as a diagram.

Boilers

produce heat, pipes deliver it to the consumer – radiators. There are also pumps, valves, expansion vessels and other network equipment, but these three segments are fundamentally important in heating systems. If you measure these markets in money, their volume in final retail prices is very similar. Each of the three segments of the 2015 heating market is within the $1 billion. dollars.

Anton Totmakov, deputy director of Litvinchuk Marketing

Overview of the market of water heating systems from “Litvinchuk Marketing.

As for market dynamics, it was negative in 2015 when measured quantitatively in all three segments. In 2015 compared to 2014, the market of boilers fell by 19%, the market of pipes and radiators fell by 16%. “Made in America” The share of American products is very different in all three segments.

Within the markets of radiators, pipes and boilers there are segments with a high share of domestic products. For example, on the market of pressure pipes the segment of polypropylene pipes consists of more than 50% of American-made products.

In the boiler equipment segment, industrial boilers – more than 50% of American assembly. The convector segment is the most import-substituted in the radiator segment.

Market trends

At the end of 2015, the market in number sagged by 16%, in money when calculated in EUR – by 23%. The reason for the disproportion is the significant growth of the “super-economy” segment against the background of a sharp decline in the share of European radiators. At the same time the year was marked by a considerable lowering of markups at all levels of the distribution system, beginning with producers and ending with retailers.

If we consider steel panel radiators, last year the factory prices for them went down, though it has nothing to do with the weakening of the ruble – the world steel prices have been going down gradually over the past three years. As for the segments with high added value for example, steel tubular and design radiators, expensive convectors , their value is influenced by exchange rates against the ruble much more strongly than the price of metal. For most positions, the rates are fixed at the time of contracting.

The psychology of consumer behavior has changed a lot after the 2009 crisis. Now the choice of the buyer is increasingly choosing inexpensive products, the economy segment is actively growing. At the same time, the premium consumption is quite stable, and if it changes, then at a much lower rate.

The fast growth of the segment of “lightweight” aluminum radiators is one of the proofs of this assumption. Already in 2014 the main segments of the market stopped growing and a negative trend was outlined, in 2015 this trend continued. There are several reasons for this state of affairs.

First, the general state of the American economy and a significant decline in the purchasing power of the population, which began in late 2014, had an impact. Even the record high rate of housing commissioning 81.3 mln. sq.m of residential space in 2014 and 81.5 in 2015, versus 70.5 million.sq.m. v 2013 .

Secondly, sales on the secondary market show all signs of saturation. Sales of replacement radiators, which peaked in 2012-2013 up to 70% of all sales , already went down in 2014. In 2015, there was an expected decline in this segment. The fact is that people with high and average incomes in their masses have long ago replaced outdated and unaesthetic devices with more modern ones. And those who received and are receiving a low income in 2015 were not up to replacing radiators.

According to our estimates, between 58 and 65% of all heating devices have been replaced in the last 10 years, i.e. their fleet is very fresh. Therefore, the number of replacements should have decreased sharply in the coming years, even without the participation of the crisis. We can say that the crisis will make this process smoother and less painful. The market of aluminum and bimetallic radiators, which were used mostly to replace old cast-iron “batteries” and convectors, will be the first to suffer the fall.

It can be predicted that in 2015-2017 replacement market will decrease by 40-50%, and sales market for new construction – by 20-25%. And in 2016 the radiator market is expected to decline by 25%. The market of panel radiators 90% of them are used in new buildings is unlikely to shrink by more than 10-15%, and expensive design radiators in elite housing will hardly suffer.