2019 China Heating Market Dynamics

China has by far the largest heating market in the world in terms of units manufactured and sold. In 2019, a little over 40,000,000 units, including, boilers, water heaters and heat pumps, were sold in China. The country also has the world’s largest network of pipes supplying gas for heating systems. China has been developing its gas network very actively over the last years and consequently the country’s total building area covered by gas pipework has more than doubled in the past 15 years. Growing accessibility of gas across the country, coupled with government’s efforts to tackle air pollution and green house gas emissions underlines the potential for continuous growth of heating in the country. To give it some perspective, the sales of gas domestic boilers have grown 10-fold in the last 11 years.

 

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Source:  BSRIA

 

Today, the heating market is shaped by three areas of sales impact, each having its own dynamic:

  1. Government policy represented mainly by “Coal to gas” and “Coal to electricity” projects

Coupled with expansion of the gas network, stronger governance, better product quality and more competitive gas prices this policy is continuing to strongly impact sales of gas fuelled products, in line with the Chinese government’s 5-year plan (2016-2020 – 3th 5-year plan.

The policy has also a strong impact on the progression of the heat pump market, mainly for water heating, although growth of heat pumps for both, heating and hot water provision has also grown in the recent years.

Compared with the vigorous “coal-to-gas” and “coal-to-electricity” projects in the domestic market, commercial boilers have higher requirements for large-scale, stable and constant fuel supply and corresponding infrastructure construction, which makes the transition from coal to cleaner energy more difficult. Nevertheless, a moderate growth was also seen in the commercial gas boiler and commercial heat pump markets.

  1. Regular project market (new build)

New build is currently driving sales of heating products thanks to the existing pre-decoration policy, which is currently supported by local government to deliver fully fitted buildings, with operational heating systems installed.

The importance of the new build market is significant in China as it delivered sales of some 1.5 million gas boilers and over 900 thousand heat pumps to the new residential dwellings.

  1. Retail market (replacement and high-end new build)

Retail distribution chain has a strong impact on sales of all heating products as it is the most common place of provision of products for clients. Those replacing old, inefficient appliances or willing to install the appliances of their own choice in the newly acquired dwellings source them in retail shops. This market is very sensitive to economic situation and changes quickly depending on the consumer confidence level. It represents a large opportunity as there are millions of heating systems in China, which are older than 10 years – the time after which replacement is normally considered. Similarly, in many new houses owners opt to have better quality heat systems than those installed by the contractor as part of the pre-decoration policy.

With regards to district heating, the market has accelerated in recent years as policies to deal with air quality have been promoted and investments have been made. There are currently more than 400 projects underway and nearly 100 enterprises engaged. The industry generally believes that the development of smart district heating projects opens attractive strategic opportunities.

However, China is in a period of low economic growth and dealing with the aftermath of COVID-19 implications. Both will have an impact on the performance of the country’s heating product sales this year.

BSRIA is preparing the updated view on 2020 market performance and short term forecast for boilers and heat pump markets that will be available in September 2020.


By Socrates Christidis, Research Manager Heating & Renewables,

BSRIA, World Wide Market Intelligence


Notes to editors:
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Thoughts on the COVID-19 impact on China’s HVAC industry

by Martin Li, BSRIA APAC

Some economic background data

After carrying out many conservative policies like Complete City Lock-down, China has started to recover from the COVID-19 related downturn. The economy has been opening since late March 2020 and is in wider re-opening stage by May 2020.

In the first two months of 2020, China’s total import and export value of goods trade reached 4.12 trillion RMB, a decrease of 9.6% comparing with the same period last year, with export, experiencing a particularly bad fall by 15.9%.

According to the latest statistics, both Manufacturing and non-Manufacturing PMIs slid down to the range far below 50% in February 2020, with 35.7% for manufacturing sector and 29.6% for non-manufacturing one. Manufacturing sector has been hit hard, and the central government is mobilizing companies returning to production to catch up with delays as soon as possible.

Construction industry represents a more mixed picture. According to Xinhua Finance, the total sales of residential housing by Top 100 developers dropped by 20.7% under the influence of the pandemic, but 24 among them, have achieved over 10 billion RMB sales, indicating that the competitive environment is going to become more concentrated in the coming months.. Another set of data from KERUIRC in its research on 27 Key Cities showed a decline of sales by 80%, and half of the cities in the sample pool supplied no new housing in February 2020.

2020 Prospects for China’s HVAC industry

Different impact in residential and commercial segment

Both global and domestic demand have fallen significantly in the first quarter of the year. Under severe lockdown rules, sales, installation, or integration work were not allowed and according to CICC, in January 2020, the entire domestic and overseas sales of AC fell by 34% and 28% respectively. The situation worsened in February and March, but the visible recovery has been noted in May.

Similar situation has been recorded in the domestic boiler market where during the first quarter 2020, sales remained heavily subdued with slow recovery noted from the April. Overall Chinese domestic heating sector shrank by 60% in the first quarter of the year.

HVAC products, like RAC-CAC or wall-hung boilers, belong to the “must have” category of products, hence market demand for those has mostly shifted and is expected to “make up”, in the coming months, for lost sales in the first quarter of the year. The whole year performance is expected to come close to the 2019’s sales levels, with the caveat, that there will be no second wave of the virus outbreak.

Commercial AC and Commercial/Industrial heating sectors have not been so severely affected by the pandemic, with many companies reporting successful achievement of their Q1 budget.

Strategic changes related to the offering and distribution business models

This pandemic seems to have forced transformation of conventional business activities. Owners of physical stores and off-line distributors have become acutely aware of the weakness of their business model. Many are now in the process of moving their operation to on-line platforms, which is likely to also accelerate their embrace of the global e-commerce.

From a product mix point of view, companies have become more aware of the importance of the variety of product offer and disadvantages of concentrating on sales of one product family type. An integrated shop/store, selling the idea of Comfort Home with a bunch of products delivering what is ultimately needed by the end user is expected to become a mainstream ideology. Integrating sales of Water, Air, Heating, Automation and Smart systems is where the industrial consensus is heading after the pandemic.

In summary, assuming the outbreak of COVID-19 can be contained and will not reappear in China, its impact on sales levels will possibly be limited in the overall year perspective. However, when debt, assets holding costs and opportunity costs will be considered, HVAC business owners will be looking for more options to mitigate unforeseeable risks in the future. In the short term some distribution and offering trends that have started to emerge before the pandemic will accelerate. In the longer-term higher market integration is likely.

Note to editors:

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Always look on the bright side

This post is by Casey Wells, Trend’s UK Marketing Manager

I’m Casey Wells, UK Marketing at Trend, and in this blog talk about how integrating lighting along with heating, ventilation and air conditioning (HVAC) into a BEMS can bring together the largest consumers of electrical energy in a building and why such integration makes sense.

According to recent industry studies, lighting accounts for 19-23 per cent of the energy used in a building, with 40-52 per cent normally being used for HVAC. This means that companies have the potential to control up to 75 per cent of their energy usage through a BEMS.

Although controlling HVAC installations by BEMS is well known, many people are still unaware of the benefits of integrating lighting control. Devices like the Trend 963 Supervisor use dashboards that visualise lighting and HVAC points on a common head-end and detail the occupancy status of different zones, as well as the current luminaire status in each area.

The normal pattern of a working week can also be catered for automatically and lighting can, for example, be scheduled to turn on and off at certain times. Of course, life doesn’t always operate to a fixed schedule, so a BEMS can offer timed schedule over-rides to cater for changes such as a late networking event.

An additional benefit for integrating lighting with a BEMS is increased levels of safety and reliability. For example, emergency lighting can be continuously monitored by the BEMS. If an irregularity does occur, the BEMS will be configured to email the facilities manager or other designated person, and provide a complete report.

Building and facilities managers have much to gain from using a BEMS that integrates lighting control. With such a system, they can take advantage of real time energy monitoring and proactively save energy.

For further information please call Trend Marketing on 01403 211888 or email marketing@trendcontrols.com.

Building Controls: Throwing a BRIC in the Works

Henry BlogThe BRIC countries; Brazil, Russia, India and China feature prominently in the news on an almost daily basis, for all sorts of reasons. While there have been concerns over a slowdown in growth, China, India and Brazil have all continued to grow through the recession at substantially faster rates than most of the developed world, and whilst the somewhat reduced growth rates may cause alarm in China and India, they would be cause for wild celebration in, say, much of Europe.

China, Brazil, Russia  and India all now rank in the World’s top 10 economies, and China is already second only to the USA, and is poised  to overtake it sometime in the next few years.

This economic development has naturally been associated with a lot of building development, including demand for such systems as HVAC and Building Automation. Nonetheless, in the BRICS countries the Building Controls markets have tended to lag behind their economic development.

Hence, according to BSRIA research, China’s Building Automating market was the world’s 5th largest in 2012, while Russia ranked 11th, India 16th and Brazil 18th.

What is more, the same research shows that the Chinese, Indian and Brazilian markets were dominated by the “Big 4” global suppliers: Siemens, Johnson Controls, Honeywell and Schneider Electric, even though the individual company shares varied reflecting local market conditions.

One thing that the history of the past 150 years has taught us is that as technologies mature and economies develop, industries tend to migrate to areas which offer the combination of lower costs and growing markets which China, India and Brazil are all in a position to do. This has been seen with the massive movement of manufacturing industry to China and of IT related industries and services to India. This in turn has created some new locally owned corporations with major industrial and financial clout, in a position to compete and invest on a global basis.

The latest update to BSRIA’s global study Challenges and Opportunities in the BACS Market , looks at a number of key trends, including the potential for new challengers to emerge in China, India and Brazil.

Unsurprisingly, the process appears to be most advanced in China. Spurred on by the wave of new construction, suppliers such as Techcon, SUPCON, Beston and RUNPAQ have started to make a real impact covering most of the main vertical markets, and including some high profile projects.

In India, where the overall market is significantly smaller, only Larsen and Toubrou, a major Indian-owned global corporation, stands out. There are however a host of Indian companies providing implementation and integration services.

This blog was written by BSRIA's Henry Lawson

This blog was written by BSRIA’s Henry Lawson

In Brazil a major domestic supplier has yet to emerge, though as in India there are a range of local companies offering related services.

In Russia, local Champions such as Regin and Polar Bear have gained a significant national market share, but have yet to have much impact elsewhere.

Past experience in other industries suggest that these countries may well provide favourable conditions for local champions to emerge and that, as their national BACS markets grow and mature, so this could even provide a springboard to offer products and services on a regional or even a global basis. This is definitely an area that everyone with an interest in Building automation, be it as a supplier, customer or service provider, should continue to watch going forward.

Other subjects that we focus on in the latest update include Technical Infrastructure Support Providers, developments in cybersecurity for buildings, and new alliances and mergers.

To find out more about Challenges and Opportunities in the BACS Market please contact Steve Turner – Steve.Turner@bsria.co.uk

Refrigeration Part 1 – Choosing the right refrigerant

Salim Deramchi, Senior Building Services Engineer at BSRIA

Salim Deramchi, Senior Building Services Engineer at BSRIA

Refrigerants are a key component for air conditioning and refrigeration. Since the 19th century there have been many refrigerants developed and used but none of them has as yet become the industry standard.

As an industry we should not consider reducing F-Gas emissions as just complying with legislation to meet government set targets, but reducing them will also have a positive effect on operating costs.  We can make cost savings through efficient operation and we can also help enhance market reputation by being more environmentally friendly.

To have a good understanding of this we need to look at:

  • Available refrigerant types
  • Our selection criteria
  • How we evaluate the available refrigerants

Traditionally commercial businesses have been using R12, a CFC, and R502a CFC/HCFC. In addressing the ozone depletion problem, most manufacturers have adopted either R404A a HFC blend or R134a. However, both are potent greenhouse gases (Nicholas Cox).

So the industry needs to look at future solutions which might be natural refrigerants, although some design change might be required on the equipment used. The following refrigerant replacements all require system and operational changes to current practice:

20140213_132647_resizedIsobutane (R600A) is a hydrocarbon , and hence is flammable. The thermodynamic properties that are very similar to those of R134a. Isobutane presents other advantages, such as its compatibility with mineral oil and better energy efficiency and cheaper than that of R134a. The use of isobutane requires minimal design changes, such as the relocation of potential ignition sources outside of the refrigerated compartment. Operational changes will also be required.

Propoane (R290). With a boiling point of -42C, propane is an excellent alternative to R22 as it requires similar working pressures. An added advantage is that except for added safety measures because of its flammability, virtually no design change is required in systems when switching from R22 to propane. The combination of its good thermodynamic and thermophysical properties yields systems that are at least as energy efficient as those working with R22. The use of propane is increasing in countries where regulations allow it.

Ammonia (R171). Ammonia has been continuously used throughout modern refrigeration history. Despite its numerous drawbacks, it is toxic and flammable in concentrations between 15.5% and 28% in air. It is not compatible with copper, thus requiring other materials of construction. Its thermodynamic and thermophysical properties also yield very efficient refrigeration systems. Because of its acute toxicity, stringent regulations apply for ammonia systems, which require close monitoring and highly skilled engineers and technicians.

20140213_132339_resizedCarbon dioxide (CO2) is not a new refrigerant. Rather, it was ‘rediscovered’ in the early 90’s. The use of carbon dioxide as a refrigerant has gone back well over a century. Its application was abandoned in the mid-50s, with the widespread use of the CFC refrigerants, which were more efficient, more stable and safer. Due to its low environmental impact, low toxicity and non-flammability, CO2 is now regaining popularity from refrigeration system designers when an alternative to fluorocarbons is being sought. (Ahmed Bensafi and Bernard Thonon)

So there are alternatives on the market and technology development is tackling this issue it is now up to the designers and operators to specify something new to move the industry forward. With F-Gas regulation 2 coming we need to get ahead of the game.

We have tried to cover some of the available refrigerants seen in the market and we will be evaluating and discussing the selection criteria in our future blogs.

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