SIC 3433
HEATING EQUIPMENT, EXCEPT ELECTRIC AND WARM AIR FURNACES



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.

NAICS Code(s)

333414 (Heating Equipment (except Electric and Warm Air Furnaces) Manufacturing)

Industry Snapshot

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. Making fire and building devices to utilize the resultant 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.

In 2000, the U.S. heating equipment industry was shipping about $4.3 billion worth of products each year. The industry was characterized by maturity, consolidation, and increasing foreign competition. To remain competitive, industry participants in the 1990s had reduced employment, increased productivity, and moved manufacturing facilities abroad.

Organization and Structure

The heating equipment industry generally encompasses all non-electric 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 in that 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.

Kerosene space heaters have traditionally been a popular residential device. Although they are costefficient and relatively easy to operate, safety concerns have 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 become a fire hazard if misused or poorly maintained. As a result, some local ordinances have banned kerosene heaters.

Gas and liquid propane (LP) supplemental heaters are of three types: 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 may also 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 Woodburning Stoves. Because they use a relatively inexpensive and renewable energy source, fireplaces and woodburning stoves are a popular alternative to boiler and supplemental heating systems. Wood-fueled heat, however, 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 woodburning 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 woodburning stoves are: traditional box (radiant), airtight (circulating), and pelletfed. 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 out. Similarly, heat extractors, which are often installed in a chimney, heat and circulate air in a room using energy from the fireplace.

Market Structure. 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—this represented the largest single industry segment. Floor and wall systems, unit heaters, infrared heaters, and stokers accounted for about 16 percent of production. Of that 16 percent, supplemental unit heaters made up about half. Domestic heating stoves of all fuel types represented about 13 percent of industry output. Various miscellaneous heating equipment accounted for about 45 percent of production. Such devices included fireplace accessories, parts and attachments for boiler systems, and domestic stoves, forced-air devices, and specialty oil-burning heaters.

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.

Background and Development

Woodburning 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.

Woodburning and coalburning 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, which was essentially an iron box, was produced in Lynn, Massachusetts, in 1642. 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. Not until 1840, did similar technology reach the United States. Central steam heaters were also 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 which could efficiently utilize gas and oil increased the scope of the market served by traditional woodburning and coalburning 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 coalburning and woodburning devices declined. Nevertheless, shipments of nearly all types of heating equipment ballooned in the postwar economic boom. As housing starts swelled in the 1950, 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 throughout 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 stagnated at about $2.1 billion. Although energy-availability shortages in the late 1970s and early 1980s aroused 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 were continuing two trends which they started in the early 1980s—consolidation and increased productivity. Like companies in other mature businesses, heating equipment producers were consolidating the industry through merger and acquisition, 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 being achieved primarily through automation and work force reduction. Between 1980 and 1990, the total number of workers employed in the industry declined nearly 30 percent, from over 26,000 to about 18,500. Some producers also realized gains by exporting some production activities and by increasing use of foreign parts. By 1991, for instance, imported parts accounted for a full 35 percent of materials used by heating equipment producers.

Going into the mid-1990s, manufacturers were facing a slight reprieve from the tepid growth that plagued them for more than a decade. 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. In 1992, conversely, sales of residential boilers jumped 8.7 percent to 321,942 units; this jump followed five successive years of decline.

In 1993, the residential heating business boomed. The result was a record shipment of 2.5 million gas furnaces. Thirteen of the 14 types of home heating equipment indexed by the Gas Appliance Manufacturers Association (GAMA) showed gains in 1993. Gas warm airfurnaces had the warmest year in 1993, with shipments of 2.5 million units, up 21 percent from 1992. These furnaces accounted for more than half of all heating equipment shipments. Oil warm air furnaces showed a gain of 5.5 percent, with shipments of 148,803 units. Hydronic residential heating systems were also up. Gas boilers totaled 187,378 shipments, a growth of 4.7 percent. Oil-fired boilers totaled 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 in 1993, by an estimated 13.7 percent. Miscellaneous room heater sales were expected to rise by a less dramatic 9 percent in 1993. Increases in residential markets, caused by a surge in homebuilding activity, were partially offset by commercial and industrial sectors. Demand for nonresidential boilers, for instance, was projected to continue its steady 2 percent per year decline.

Current Conditions

The value of industry shipments increased slowly, from $2.1 billion in 1987 to $2.3 billion in 1996, a mere 7 percent in 10 years. However, shipment value made a sizable jump in 1997 to over $3.7 billion, and by 2000, the industry was shipping more than $4.3 billion worth of goods. Sales continued to be bolstered by demand for energy efficient systems at the turn of the twenty-first century.

Replacement of central heating systems continues to lead the field, accounting for almost 70 percent of all central heating systems shipped, and virtually all homes that are built are built with central heating systems. This new construction accounts for more than 1.3 million units a year, with about two-thirds of single-family homes using a gas-heat furnace.

In the future, increased automation and movement of some production activities overseas will likely exert downward pressure on wage growth for traditional heating equipment manufacturing jobs. But job prospects for highly technically skilled workers were expected to grow through 2006 to keep up with increasing demand for products.

Industry Leaders

The top company in this industry sector for 1999 was Falcon Building Products Inc., of Chicago, Illinois. Falcon posted $686 million in sales and 4,200 employees. Second was Schutte and Koerting Division of Bensalem, Pennsylvania, which posted $127 million in sales and employed around 100 workers. Third was Sterling Radiator Division of Westfield, Massachusetts, which employed 1,400 workers and posted $112 million in sales.

There were a total of 469 establishments in this industry in the late 1990s, which collectively employed 26,010 workers in 2000, 17,324 of whom were in production. Wages averaged $12.98 an hour in 2000, and a typical workweek was 43.3 hours with an average 4.6 hours of overtime.

Workforce

Employment prospects in the heating equipment industry were bleak going into the mid-1990s. The U.S. Bureau of Labor Statistics estimates that employment in most heating equipment manufacturing positions will decline by 15 percent to 25 percent between 1990 and 2005. Positions for assemblers and fabricators, which account for a leading 15 percent of total jobs in the industry, were expected to decline by 23 percent. Jobs for grinders and polishers, machine tool workers, and lathe operators will also decline by over 20 percent. Manufacturing opportunities will arise, however, for some machinists, sheet metal workers, and tool and die makers. Furthermore, sales positions are expected to increase by over 22 percent.

Further Reading

Darnay. Arsen J., ed. Manufacturing USA. 5th ed. Detroit: Gale Research, 1996.

Heating, Air Conditioning, and Refrigeration Technicians. 1998-99 Occupational Outlook Handbook. Bureau of Labor Statistics. 2000. Available from http://stats.bls.gov .

United States Census Bureau. "Statistics for Industries and Industry Groups: 2000." Annual Survey of Manufacturers. February 2002. Available from http://www.census.gov .

Ward's Business Directory of U.S. Private and Public Companies. Farmington Hills, MI: Gale Group, 1999.



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