Heating Equipment, Except Electric and Warm Air Furnaces

SIC 3433

Companies in this industry

Industry report:

This category covers establishments primarily engaged in manufacturing heating equipment, except electric and warm air furnaces, including gas, oil, and stoker coal-fired equipment for the automatic utilization of gaseous, liquid, and solid fuels. Establishments primarily engaged in manufacturing warm air furnaces are classified in SIC 3585: Air-Conditioning and Warm Air Heating Equipment and Commercial and Industrial Refrigeration Equipment; cooking stoves and ranges are classified in SIC 3631: Household Cooking Equipment; boiler shops primarily engaged in the production of industrial, power, and marine boilers are classified in SIC 3443: Fabricated Plate Work (Boiler Shops); and those manufacturing industrial process furnaces and ovens are classified in SIC 3567: Industrial Process Furnaces and Ovens.

Industry Snapshot

Making fire and building devices to utilize the resulting heat were among the earliest and most noteworthy human achievements. Some stove, furnace, and other equipment designs implemented as early as 600 B.C. were still in use throughout the world in the twentieth century. The heating equipment industry is comprised of firms primarily engaged in manufacturing heating devices other than electric equipment and warm air furnaces. Residential and low-pressure boilers are included in this classification, as are steam and hot-water furnaces, fireplaces, room heaters, heating stoves, and other mechanisms.

By the first decade of the 2000s, the industry was characterized by maturity, consolidation, and increasing foreign competition. To remain competitive, industry participants reduced employment. For example, industry employment fell from 22,265 in 2002 to 20,454 in 2005 and 19,702 in 2008. By 2009, manufacturers of heating equipment, except electric and warm air furnaces, employed only 16,539 workers. Other ways firms tried to keep expenses down were by increasing productivity and moving manufacturing facilities abroad where labor was cheaper.

According to industry statistics from Dun and Bradstreet (D&B), there were an estimated 871 manufacturers of heating equipment, except electric, in the United States in 2010. Together these firms employed 19,817 people and generated $1.19 billion in revenues. California, Pennsylvania, New York, and Ohio were home to the majority of heating equipment manufacturers.

Organization and Structure

The heating equipment industry generally encompasses all nonelectric devices used to heat spaces in homes, buildings, and industrial structures. Such heaters are powered by coal, oil, gas, wood, or solar power. In addition to their different energy sources, industry offerings can be categorized as fireplaces and wood-burning stoves, supplemental heaters, or low-pressure steam and hot-water boilers and furnaces. Warm air furnaces and high-pressure steam and hot-water systems, which are often used as central heating systems for larger structures, are included in SIC 3585: Air-Conditioning and Warm Air Heating Equipment and Commercial and Industrial Refrigeration Equipment and SIC 3443: Fabricated Plate Work (Boiler Shops), respectively.
Low-Pressure Boilers
Low-pressure steam and hot-water boilers differ from other industry offerings because they are often used as central heating devices to warm several spaces within a structure. A hot-water system usually consists of a centrally located cast-iron boiler and a network of steel or copper pipes that are connected to satellite radiators. Water is heated in the boiler and transferred up through the pipes to the radiators. As the water travels through the metal radiator, it releases heat, becomes more dense, and falls back down to the boiler where it is reheated. Motor-driven pumps are used to increase pressure and to allow rooms below the boiler to receive heat.

Steam-heating systems work similarly to hot-water systems. Because steam is a gas, however, it cannot hold heat as well as water, and it is more susceptible to sharp temperature fluctuations. As a result, steam systems generally require more apparatus and are less efficient for many residential as well as some commercial applications.

Supplemental Heaters
Non-electric supplemental heaters are used to heat spaces that are not connected to centralized heating systems, such as garages and warehouses. In addition, they are often used for "zone" heating, a complement to a central heating system that can reduce overall energy costs. Space heaters typically run on natural gas and oil.

Traditionally, kerosene space heaters have been a popular residential device. Although they are cost-efficient and relatively easy to operate, safety concerns reduced the desirability of these heaters in relation to competing products. Open-flame kerosene heaters deplete oxygen and emit carbon monoxide. In addition, they can be a fire hazard if misused or poorly maintained. As a result, some local ordinances have banned kerosene heaters.

There are three types of gas and liquid propane (LP) supplemental heaters: infrared-radiant, which transfer most of their heat through direct infrared radiation from the heater to the objects in a room; convection, which heat and recirculate air; and catalytic, which produce heat when gas is distributed and ignited over a platinum-plated grid. Gas and LP heaters are comparatively clean-burning and inexpensive to operate. They also require little or no ventilation.

Portable forced-air heaters are commonly used to heat work areas, such as outdoor construction sites. Although they are fueled by oil, kerosene, or gas, they also may use electric fans to disperse the heat. Industrial forced-air systems can supply as much as 600,000 British thermal units (BTUs) of heat. Other supplemental heating devices include baseboard units, duct fans, solar heaters, and various oil-filled heaters, many of which incorporate electrical devices.

Fireplaces and Wood-Burning Stoves
Because they use a relatively inexpensive and renewable energy source, fireplaces and wood-burning stoves are a popular alternative to boiler and supplemental heating systems. However, wood-fueled heat is relatively inefficient and emits more pollution than oil, gas, or LP. A standard fireplace, for instance, is only 5 to 15 percent energy efficient when a fire is burning, and -5 to -10 percent inefficient when the fire is dying. Although many wood-burning stoves are 40 to 65 percent energy efficient, most other heaters are much more efficient and pollution-free. Many furnaces, for example, offer greater than 70 percent efficiency.

The three principal types of wood-burning stoves are traditional box (radiant), airtight (circulating), and pellet-fed. Airtight stoves have a sealed firebox, a tight-fitting door, and a manually or thermostatically controlled air intake damper that controls burning. Pellet-fed stoves burn processed wood pellets that are fed into the stove's combustion chamber electronically, allowing greater heat control and efficiency.

Fireplace heating products offered by manufacturers in the industry include artificial gas fireplaces and various heat-saving accessories. Heat recovery systems, for instance, generate heat through convection and radiation using energy from an open fire. Tube grates pull cool air out of the room and blow hot air back into the room. Similarly, heat extractors, which are often installed in a chimney, heat and circulate air in a room using energy from the fireplace.

Background and Development

Wood-burning stoves, believed to be the earliest heating devices, were first used by the Chinese in 600 B.C. Central heat was first used in 350 B.C., when the Greeks began building flues beneath building floors to heat rooms. The Romans developed more complex central heating systems called hypocausts in the early Christian era. These systems transferred heat from a furnace using conduction, convection, and radiation. Although the chimney was not developed until the fourteenth century, heating systems designed for European castles in the eleventh and twelfth centuries were important precursors to the flue and other space-heating contraptions.

Wood-burning and coal-burning stove technology continued to advance before and during the Middle Ages. In fact, stoves similar in design to the earliest Chinese units were still in use throughout Russia and parts of Europe in the 1990s. The first manufactured cast-iron stove was produced in Lynn, Massachusetts, in 1642, and was essentially an iron box. Benjamin Franklin improved this design in 1744 by joining the stove to a fireplace. The first round cast-iron stoves, which became popular in the nineteenth century, were built in Pennsylvania in 1800 by Isaac Orr.

Central heating system technology, in contrast to advances in stove systems, languished after the fall of the Roman Empire. The first central hot-water system that used pipes to heat a building, for instance, was created in 1792 to heat the Bank of England. It was not until 1840 that similar technology reached the United States. Central steam heaters also were developed in the late 1700s and were implemented in the United States in the late 1800s. Not until the early twentieth century were hot air systems, similar to those used in the Roman hypocausts, revived for practical use.

In addition to new heat delivery methods, such as steam and hot water, central furnaces, and iron stoves, the burgeoning U.S. heating equipment industry also benefited from the commercial application of new fuels in the nineteenth and twentieth centuries. In the early 1900s, particularly in the 1920s, heating devices that could efficiently utilize gas and oil increased the scope of the market served by traditional wood-burning and coal-burning device manufacturers. Likewise, the availability of liquefied propane in the 1940s significantly boosted demand for gas-powered heaters.

Gas- and oil-powered heating equipment, as well as electrical equipment classified in other industries, proliferated during the 1940s through the 1970s. As a result, the share of the heating equipment market represented by coal-burning and wood-burning devices declined. Nevertheless, shipments of nearly all types of heating equipment ballooned in the postwar economic boom. As housing starts swelled in the 1950s, 1960s, and 1970s, the demand for space heaters, stoves, and fireplace accessories blossomed. Booming commercial, industrial, and institutional markets hiked the production of boiler and radiator systems. The even faster proliferation of warm air furnaces and electric heating equipment, however, cannibalized growth in some industry segments.

Despite solid market growth during much of the 1970s, manufacturers realized by the end of that decade that the heating equipment industry had entered maturity. Although fluctuations in energy prices caused temporary spurts in demand in various industry segments, the overall demand for heating equipment had stabilized. Throughout the 1980s the value of industry shipments was stagnant at about $2.1 billion. Although energy-availability shortages in the late 1970s and early 1980s provoked interest in some alternative heating equipment, such as solar-powered systems, sales from these segments collapsed in the mid-1980s as energy costs stabilized and alternative-energy tax incentives faded.

Although some manufacturers were able to take advantage of budding foreign markets during the 1980s, domestic producers generally found themselves under increasing pressure from foreign rivals in their core U.S. market. Stagnant revenue growth and declining profit margins plagued many producers throughout the decade.

In response to idle markets and downward pressure on margins, heating equipment manufacturers in the early 1990s continued two trends started in the early 1980s--consolidation and increased productivity. Like companies in other mature businesses, heating equipment producers consolidated the industry through mergers and acquisitions or by exiting the market and abandoning market share. The primary benefits for competitors of mergers and acquisitions were related to multiple economies of scale and increased financial strength.

Increasing productivity, the second trend, was achieved primarily through automation and workforce reduction. Between 1980 and 1990, the number of industry employees declined nearly 30 percent, from more than 26,000 to about 18,500. Some producers also realized gains by exporting some production activities and by increasing the use of foreign parts. For instance, by 1991, imported parts accounted for 35 percent of materials used by heating equipment producers.

In the early 1990s, cast-iron boilers, radiators, and convectors used in steam and hot-water systems accounted for about 25 percent of industry sales and represented the largest single industry segment. Floor and wall systems, unit heaters, infrared heaters, and stokers accounted for about 16 percent of production. Supplemental unit heaters made up about half of that 16 percent. Domestic heating stoves of all fuel types represented about 13 percent of industry output. Various miscellaneous heating equipment, including fireplace accessories, parts and attachments for boiler systems, and domestic stoves, forced-air devices, and specialty oil-burning heaters, accounted for about 45 percent of production.

Residential and personal uses accounted for about 32 percent of heating equipment expenditures in the mid-1990s. Office buildings consumed about 10 percent of production, and miscellaneous farm, industrial, and commercial uses accounted for about 51 percent of the market. Exports consumed the remaining 7 percent of production.

Manufacturers faced a slight reprieve from the tepid growth that plagued them for more than a decade as they moved into the mid-1990s. This growth represented marked improvements over sales in the early 1990s. For instance, total unit sales of all types of heating equipment fell from $2.4 million in 1989 to $2.2 million in 1990. Conversely, in 1992, sales of residential boilers jumped 8.7 percent to 321,942 units after five successive years of decline.

In 1993, the residential heating business boomed. The result was a record shipment of 2.5 million gas furnaces. Gains were reported by 13 of the 14 types of home heating equipment indexed by the Gas Appliance Manufacturers Association (GAMA) in 1993. Gas warm-air furnaces accounted for more than half of all heating equipment shipments in 1993; however, hydronic residential heating systems reported gains. The number of gas boilers shipped was 187,378, a growth of 4.7 percent. The number of oil-fired boilers shipped was 118,119 units, a gain of 11.2 percent. The only negative statistic in the business was for gas floor furnaces, which were down 11 percent at 13,583 shipments.

Sales of residential baseboard and convector devices jumped an estimated 13.7 percent in 1993. Increases in residential markets, caused by a surge in home-building activity, were partially offset by commercial and industrial sectors. Demand for nonresidential boilers, for instance, was expected to continue its steady 2 percent annual decline.

The value of industry shipments increased a mere 7 percent between 1987 and 1996, from $2.1 billion to $2.3 billion. However, shipment values made a sizable jump in 1997, exceeding $3.7 billion, and in 2005, the industry shipped nearly $4.59 billion worth of goods. Sales continued to be bolstered by demand for energy-efficient systems.

The replacement of central heating systems continued to lead the field, accounting for almost 70 percent of all central heating systems shipped, and virtually all new homes were built with central heating systems. New construction accounted for more than 1.3 million units annually in the mid-2000s, with about two-thirds of single-family homes using a gas-heat furnace. Condensing furnaces also were gaining in popularity, with the accompanying energy efficiency.

The Gas Appliance Manufacturers Association merged with the Air-Conditioning and Refrigeration Institute to become the Air-Conditioning, Heating, and Refrigeration Institute (AHRI) in 2008, the trade association representing manufacturers of air conditioning, heating, and commercial refrigeration equipment. According to AHRI, the heating equipment industry was negatively affected by the economic downturn of the late 2000s. The industry was not expected to rebound until residential construction improved.

Current Conditions

According to industry statistics from D&B, in 2010, 40 percent of establishments in the industry were reported to manufacture heating equipment, except electric. This general sector was also responsible for about 40 percent of total industry revenues and 40 percent of total employment. Other large subcategories in terms of revenues included solar heaters ($196.9 million); burners, furnaces, boilers, and stokers ($110.3 million); steam or hot-water low-pressure boilers ($94.8 million); and gas fireplace logs ($58.6 million). Smaller subcategories were domestic or industrial oil burners ($55.6 million) and wood- and coal-burning stoves ($48.3 million), among others. Other D&B statistics showed that Pennsylvania accounted for the largest percentage of sales in the industry in 2010, with 12 percent, followed by California with 8 percent and Minnesota with 7 percent.

Concerns about the environment continued to be a major issue for the industry into the early 2010s, with some sectors (e.g., gas-fired heaters) boasting a better record than others (e.g., oil-burning heaters). A 2011 study by the Climate Policy Initiative found that states that had conformed to Department of Energy building codes or adopted their own had lower energy use and lower greenhouse gas emissions. According to Professional Services Close-Up, these states "encouraged the use of highly efficient natural gas heaters and electric heat pumps [and] shifted their energy use away from oil and wood fuels towards lower-emissions natural gas."

Industry Leaders

Leaders in the industry in the early 2010s included Mestek Inc. of Westfield, Massachusetts, which manufactured heating, ventilating,, and air conditioning (HVAC) equipment, including hydronic heat-distribution and gas-fired heating units. Its Embassy Industries division made radiant heating products that were sold in North America and Europe. The firm employed 2,584 people. Lennox International Inc. of Richardson, Texas, was also a major player. Founded in 1895, the firm manufactured all types of HVAC equipment, including furnaces, heat pumps, and fireplaces. The firm had 11,800 employees throughout the world and reported more than $3.0 billion in revenues in 2010. Also, Goodman Manufacturing Company of Houston, Texas, was one of the United States' largest manufacturers of HVAC equipment for industrial and residential use. It had sales of $1.85 billion in 2010 with 4,000 workers.

Workforce

According to the U.S. Census Bureau, the heating equipment (except warm air furnaces) manufacturing industry employed 16,539 people in 2009, down from 19,702 in 2008; 20,454 in 2005; and 22,265 in 2002. In 2009 about 56 percent of employees were production workers earning an average of $17.83 an hour.

Increased automation and movement of production activities overseas continued to exert downward pressure on wage growth for traditional heating equipment manufacturing jobs into the early 2010s.

© COPYRIGHT 2018 The Gale Group, Inc. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. For permission to reuse this article, contact the Copyright Clearance Center.

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