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Boiler & Heat Exchanger Manufacturing in the USMarch 2016 1

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Boiling over: Weak steal prices will temporarily


cause industry revenue to decline

IBISWorld Industry Report 33241

Boiler & Heat Exchanger


Manufacturing in the US
March 2016

Rory Masterson

2 About this Industry

17 International Trade

34 Key Statistics

Industry Definition

19 Business Locations

34 Industry Data

Main Activities

Similar Industries

22 Competitive Landscape

Additional Resources

22 Market Share Concentration

34 Annual Change

22 Key Success Factors

3 Industry at a Glance

34 Key Ratios

35 Jargon & Glossary

22 Cost Structure Benchmarks


24 Basis of Competition

4 Industry Performance

25 Barriers to Entry

Executive Summary

26 Industry Globalization

Key External Drivers

Current Performance

27 Major Companies

Industry Outlook

27 Modine Manufacturing Company

10 Industry Life Cycle

30 Operating Conditions
12 Products & Markets

30 Capital Intensity

12 Supply Chains

31 Technology & Systems

13 Products & Services

31 Revenue Volatility

14 Demand Determinants

32 Regulation & Policy

15 Major Markets

33 Industry Assistance

www.ibisworld.com | 1-800-330-3772 | info @ibisworld.com

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About this Industry


Industry Definition

This industry primarily manufactures


boilers and heat exchangers. Boilers are
closed vessels where fluid is heated, while
heat exchangers allow thermal energy to

Main Activities

The primary activities of this industry are

be transferred between fluids while


keeping them separate. Industry products
are used in a variety of industrial, energy
and commercial markets.

Manufacturing heat exchangers and steam condensers


Manufacturing boilers and parts/attachments
Manufacturing nuclear reactor steam supply systems

The major products and services in this industry are


Heat exchangers and steam condensers
Nuclear reactor steam supply systems
Power boilers and parts/attachments
Other

Similar Industries

33242 Metal Tank Manufacturing in the US


This industry manufactures heavy-gauge tanks, which are similar to the products made by the Boiler and
Heat Exchanger Manufacturing industry in terms of their design and construction.
33243 Metal Can & Container Manufacturing in the US
This industry manufactures light-gauge metal containers, which are primarily used as beverage and food
cans.
33341 Heating & Air Conditioning Equipment Manufacturing in the US
This industry manufactures HVAC and commercial and industrial refrigeration and freezer equipment.
23822a Heating & Air-Conditioning Contractors in the US
This industry provides installation services related to plumbing, heating and air conditioning.

Additional Resources

For additional information on this industry


www.abma.com
American Boiler Manufacturers Association
aceee.org
American Council for an Efficient-Energy Economy
www.htri.net
Heat Transfer Research Inc.
www.steeltank.com
Steel Tank Institute
www.tema.org
Tubular Exchanger Manufacturers Association Inc.

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Boiler & Heat Exchanger Manufacturing in the US March 2016

Industry at a Glance
Boiler & Heat Exchanger Manufacturing in 2016

Key Statistics
Snapshot

Revenue

Annual Growth 11-16

Annual Growth 16-21

Profit

Exports

Businesses

$7.2bn

1.5%

1.2%
253

$444.1m $1.7bn

Industrial production index

Revenue vs. employment growth

Market Share

Modine
Manufacturing
Company 
6.2%

20

8
4

% change

% change

10
0
-10
-20

Year 08

0
-4
-8

10

12

Revenue

14

16

18

20

-12

Year

22

09

11

13

15

17

19

21

Employment
SOURCE: WWW.IBISWORLD.COM

p. 27

Products and services segmentation (2016)

7.2%

Key External Drivers

Nuclear reactor steam


supply systems

Industrial
production index

14.3%

Trade-weighted index

Power boilers and


parts/attachments

World price of steel


Demand from
petroleum refining
Demand from food
manufacturing

15.0%
Other

63.5%

Heat exchangers and


steam condensers
p. 4
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SOURCE:
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Industry Structure

Life Cycle Stage


Revenue Volatility
Capital Intensity

Mature
Medium
Low

Industry Assistance

Medium

Concentration Level

Low

FOR ADDITIONAL STATISTICS AND TIME SERIES SEE THE APPENDIX ON PAGE 34

Regulation Level

Medium

Technology Change

Medium

Barriers to Entry

Medium

Industry Globalization
Competition Level

High
Medium

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Industry Performance

Executive Summary | Key External Drivers | Current Performance


Industry Outlook | Life Cycle Stage
Executive
Summary

The Boiler and Heat Exchanger


Manufacturing industry is anticipated to
grow in a volatile fashion over the five years
to 2016 due to mixed performance in
downstream markets. In addition, globally
determined price levels of key inputs, such
as steel, are volatile and influence the
selling price of boilers and heat exchangers.
Steel prices have been weak since 2012 due
to global oversupply, lowering selling prices
and subduing revenue growth for this
industry. Overall, industry revenue has

grown by 1.5% per year on average in the


five years to 2016; however, this includes
slower growth in the later years and even a
decline of 2.0% in 2016, bringing total
revenue to $7.2 billion.
Imports have compounded the
challenges of volatile demand and low
prices. Imports currently fulfill 23.2%
of all domestic demand for boilers and
heat exchangers and compete primarily
on the basis of price. Imports come

from a variety of countries, including


cost-efficient steel product
manufacturers in South Korea and
China. Export markets had previously
been a bright spot amid these
challenges, with operators capitalizing
on growing demand for high-quality
boilers and exchangers in emerging
economies. However, export growth has
recently faltered due to a strengthening
US dollar. Pricing pressures and
competition in domestic and
international markets is expected to
limit profit to 6.2% of revenue by 2016.
Over the next five years, increased
manufacturing, extraction and
commercial operations are anticipated to
boost demand for boilers and heat
exchangers. However, ongoing import
penetration will limit the degree to which
domestic demand benefits industry
operators. In addition, although steel
prices are expected to rise slowly over the
next five years, the ability of operators to
pass costs downstream will likely become
more constrained due to the heightened
competition. Overall, IBISWorld expects
industry revenue to grow an annualized
1.2% to $7.6 billion over the five years to
2021, while profit margins remain modest.

Industrial production index


Nearly half of the industrys revenue is
generated from the domestic industrial
sector. As the level of output of
manufacturing, mining and utility
industries increases, demand for boilers
and heat exchangers rises. The industrial
production index is expected to increase
over 2016, presenting an opportunity for
the industry.

foreign buyers ability to purchase


industry products while resulting in
higher relative import prices. Conversely,
when the value of the dollar rises, there is
greater import competition while
industry exports become less competitive.
The value of the US dollar, and thereby
the trade-weighted index, is expected to
increase rapidly over 2016, presenting a
threat to the industry.

Trade-weighted index
The trade-weighted index measures the
strength of the US dollar relative to the
currencies of its major trading partners.
As the value of the dollar falls, it boosts

World price of steel


The majority of the industrys products
are composed of steel, and purchases of
this manufacturing input constitute a
large component of the average

Globally

determined price levels of key inputs


are volatile and influence the selling price of
industry products

Key External Drivers

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Industry Performance

companys cost structure. Despite


increasing price-based competition,
operators have generally been able to
pass on raw material costs downstream
via selling prices. The world price of steel
is expected to decline slightly over 2016,
pulling selling prices and revenue down.
Demand from petroleum refining
Domestic refining industries are
anticipated to account for a small share
of total industry revenue. Refinery
processes, particularly those in large
refineries, are particularly steam
intensive. Consequently, as revenue for
the refinery sector increases, demand for

industry products generally follows. The


Petroleum Refining industry is expected
to contract in 2016.
Demand from food manufacturing
Food and beverage manufacturers use
the products manufactured by the Boiler
and Heat Exchanger Manufacturing
industry primarily for refrigeration
purposes, including transporting
refrigerated food and beverage products.
When demand for frozen and
refrigerated foods increases, demand for
industry products grows. The food
manufacturing sector is expected to
grow slowly over 2016.
Trade-weighted index

Industrial production index


10

110

100

90

Index

% change

Key External Drivers


continued

-5
-10
-15

Year

80
70

09

11

13

15

17

19

21

60

Year 06

08

10

12

14

16

18

20

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Industry Performance

Volatile conditions

Product sales for operators in the Boiler


and Heat Exchanger Manufacturing
industry have fluctuated during most of
the five years to 2016. Demand is heavily
dependent upon downstream industries,
particularly companies considered part of
the industrial sector. While demand from
food manufacturing has grown over the
past five years, demand from other
markets such as power generation and
petroleum refining has been weak. In
addition, product prices and profitability
have remained volatile, due primarily to
the volatility of steel price levels. Finally,
movements indicating an increasing role
for both imports and exports in the
industry add to this tension, as foreign
markets provide both intensified
competition and opportunities for
growth. These conflicting trends have

resulted in industry revenue rising and


falling intermittently, with average
annual growth of 1.5% in the five years to
2016 to $7.2 billion.

Industry operators rely on a number of


downstream industries for revenue,
including companies involved in the
chemicals, paper, food, refining and
commercial sectors. This wide array of
demand sources has hedged industry
performance against setbacks in any one
industry. In particular, demand from
food manufacturing has risen steadily
over the past five years and provided a
buffer to operators servicing this market.
Having this relatively acyclical
downstream market provided additional
aid to industry manufacturers during the
economic downturn. Purchases of
durable goods and machinery have also
boosted industry revenue over the period,
with private investment rising steadily
through 2016.
Unfortunately for operators, not every
major market for industry operators
performed as well. For example, demand
from petroleum refining has been rising
and falling intermittently with the world
price of crude oil; the price of oil,
currently at historic lows, is limiting

demand from this market. The power


generation market has also been fickle
over the period. Moreover, purchases of
boilers and heat exchangers by
commercial buyers, such as retailers, are
volatile as these buyers often turn to
cheaper imports.
In addition, the majority of the
industrys products are composed of
steel, and while the world price of steel
has declined an annualized 0.6% over the
past five years, this masks a great deal of
volatility. Steel prices rose rapidly with
the onset of global recovery, through to
2011, before declining rapidly due to
oversupply in the global market. Because
costs are passed downstream, these
trends have affected the industrys selling
prices and revenue in the same direction,
with revenue growing rapidly through
2012 before stagnating. Weak steel prices
are expected to cause industry revenue to
fall 2.0% in 2016. Volatility in these
prices has also made it difficult for
industry operators to effectively plan and
optimize their output levels.

Industry revenue
20
10

% change

Current
Performance

0
-10
-20

Year 08

10

12

14

16

18

20

22

SOURCE: WWW.IBISWORLD.COM

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Industry Performance

A global game

Efficiency trends

The Boiler and Heat Exchanger


Manufacturing industry is highly
globalized. In the 2000s, demand for
industry products in emerging
economies, such as India, had
skyrocketed. Partially because of this
trend, exports had risen rapidly over the
decade. Export growth was also aided by
a depreciating US dollar, which made US
goods more affordable in international
markets. Unfortunately for operators
these trends have since reversed, with
demand from emerging markets slacking
and the US dollar appreciating. Although
exports grew 1.9% per year on average
over the past five years to $1.7 billion,
this masks a steady decline in exports
over the past three years.
The global arena also presents an
immediate threat to industry operators in

the form of imports, with an estimated


$1.7 billion worth of imported boilers and
heat exchangers by 2016. Imports capture
nearly one-third of the total domestic
market and have grown an annualized
5.3% over the five year period. Imports
come from a variety of countries including
neighboring Canada, as well as costefficient manufacturers in South Korea,
China and Germany competing primarily
on the basis of price. Imports from Korea
in particular have skyrocketed over the
past few years, intensifying pricing
pressures faced by operators.

Market share concentration within the


Boiler and Heat Exchanger
Manufacturing industry is low, given that
the top four producers account for less
than 20.0% of total industry revenue.
Moreover, the industrys concentration
has remained very stable over the fiveyear period, with the number of
companies falling 1.3% to 253 companies
by 2016 due to consolidation, keeping the
industrys landscape stable.
The average profit margin is expected
to reach 6.2% in 2016, an increase from
the margins of 2011 despite steel prices
and selling prices being higher at the
time. In addition, due to import
competition, it is increasingly difficult for
operators to raise prices substantially
above their competitors. However, there
is a good deal of competition on the basis
of quality, particularly with product
efficiency levels, as downstream buyers

attempt to lower costs and contend in


their own competitive industries.
International competition has also
resulted in certain low-tech industry
products being sourced abroad. The
remaining domestic manufacturers
rely on their comparative technological
advantages to enable them to compete
successfully on the international stage.
Increasing technical demands have
raised the skill level required by the
average employee and therefore, the
average wage demanded. This trend
toward consolidation and increasing
competition for skilled labor has
increased total wages in the industry
an annualized 0.5% over the past five
years to $1.4 billion. Nevertheless,
wages as a share of revenue has
declined slightly as revenue growth
outstrips wage growth, indicative of
greater labor productivity.

The global arena represents

both an opportunity and


threat to industry operators

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Industry Performance

Industry
Outlook

The Boiler and Heat Exchanger


Manufacturing industry is projected to
grow at a slow-to-moderate pace in the
years ahead. This growth will be fueled by
renewed demand from industrial and
commercial sectors alike and by
recovering steel prices. However, growth
will be tempered by heightened

Demand growth and


regulation

The performance of the Boiler and Heat


Exchanger Manufacturing industry will
continue to be largely defined by its
downstream industries. Fortunately for
industry operators, growth is expected
for the majority of its major markets.
Demand from food manufacturing is
not expected to grow sharply, given the
nondiscretionary nature of the products
manufactured by the industry.
However, the true barometer for boiler
and heat exchanger manufacturers are
the demand levels from industrial
sectors and the industrial production
index as a whole. From 2016 to 2021,
the industrial production index is
anticipated to rise steadily,
representing continued improvement
and largely explaining revenue gains for
this industry going forward.
Rebounding steel prices will also
contribute to growth over the period, as
operators raise selling prices in response.
Still, the extent to which operators can
pass costs downstream will depend on
the degree of competition from lowpriced imports. Due to heightened import

competition, operators are projected to


raise prices modestly over the next five
years, pushing profit to only about 4.2%
of revenue by 2021.
In addition, the US Department of
Energys increased efficiency standards
for residential boilers and furnaces began
requiring compliance on November 19,
2015. This is expected to provide a boost
for industry operators through 2021, as
downstream markets purchase new,
regulation-compliant boilers to meet the
efficiency standards. Clearly, the need to
manufacture more efficient products will
also extol a cost on the industry;
however, it will still benefit operators if
the cost is passed on to customers in full.
Industry operators that quickly meet the
new efficiency standards will be in a
better position to win contracts in the
tendering process.

Despite positive trends from downstream


markets, the appreciation of the US
dollar against the currencies of its main
trading partners will temper revenue
increases to a certain degree. The tradeweighted index (TWI) is forecast to grow
steadily through 2021. The effect of this
increase is twofold: US exports will

become relatively more expensive to


foreign buyers, while foreign imports will
become comparatively cheaper to
domestic buyers.
As a result, imports are expected to
rise an annualized 1.0% through 2021 to
$1.7 billion, while export growth is
expected to slow down to an annualized

International trade

international competition and the effect


of the rising value of the US dollar on
export levels. Due to these trends,
revenue in the Boiler and Heat Exchanger
Manufacturing industry is projected to
rise at an annualized rate of 1.2% to reach
$7.6 billion by 2021, beginning with 2.8%
growth during 2017.

Rebounding

steel prices
will contribute to growth
over the period

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Industry Performance

International trade
continued

0.4% over the period, also to $1.7 billion.


Still, foreign demand for technologically
advanced US products will remain
strong, tempering the impact of currency
appreciation to a certain extent. Industry

Industry landscape

Due to higher regulatory compliance costs


and greater import competition, the
industry is likely to consolidate over the
next five years. Consolidation of
production will help larger companies
reduce fixed costs and improve profit
margins; it also helps protect market
share amid rising external competition. As
a result, the total number of companies in
the industry is expected to rise slightly
over the five-year period, at an annualized
rate of 0.5% to 259 companies by 2021.
This trend will also increase the relatively
low market share concentration that exists

operators must continue to produce


products with superior functional design
and performance capabilities if they wish
to compete against lower-priced foreign
products in global markets.

Consolidation

of
production will help larger
companies reduce fixed
costs and improve profit
in the industry. Wages are expected to
continue rising, as the industry requires a
more skilled workforce for production and
oversight; IBISWorld expects wages to
rise an annualized 1.3% through 2021 to
$1.5 billion.

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Industry Performance
Life Cycle Stage

The industrys share of the US economy


is remaining relatively constant
Import competition is strong, but US
competitiveness is improving

% Growth in share of economy

Significant merger and acquisition activity


slows the rate of company growth

20

Maturity

Quality Growth

Company
consolidation;
level of economic
importance stable

High growth in economic


importance; weaker companies
close down; developed
technology and markets

15

Key Features of a Mature Industry


Revenue grows at same pace as economy
Company numbers stabilize; M&A stage
Established technology & processes
Total market acceptance of product & brand
Rationalization of low margin products & brands

10

Quantity Growth

Many new companies;


minor growth in economic
importance; substantial
technology change

Heavy Engineering
Construction

Heating & Air-Conditioning Contractors


Metal Tank Manufacturing
Paint Manufacturing

Boiler & Heat Exchanger Manufacturing


Nuclear Power

Decline

-5

Shrinking economic
importance

-10
-10

-5

10

15

20

% Growth in number of establishments


SOURCE: WWW.IBISWORLD.COM.AU

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Industry Performance

Industry Life Cycle


This

industry
is M
 ature

The Boiler and Heat Exchanger


Manufacturing industry is in the mature
stage of its economic life cycle. This stage
is characterized by a stable contribution
to economic output. Industry value added
(IVA), which measures an industrys
contribution to the overall economy, is
expected to increase an annualized 1.6%
during the 10 years to 2021; this is slower
than the US GDPs forecast growth over
the period, at about 2.3% per year on
average. Nevertheless, the industrys
share of total economic output is stable.
Other characteristics are indicative of
industry maturity, including a
slowdown in the rate of operators
entering the industry and in
technological development. Industry
participation is projected to remain
limited over the period, as competition
and barriers to success intensify.
Simultaneously, technological changes
have focused on maintaining a

competitive cost structure rather than


product development. For example,
advancement in computerized grinding,
welding and assembly have reduced the
amount of time required from the
design and production stages.
Organizational technology is strongly
reflective of a mature industry with
stable product lines and markets and
with little room for product innovation.
A pick up in downstream demand is
the key factor explaining forecast
industry growth over the next five years.
However, imports pose a significant
threat to US boiler and heat exchanger
manufacturers, as they account for nearly
a third of industry demand. Additionally,
this share is expected to increase over the
next five years. Import penetration will
mitigate profit margin growth for
operators, as will volatile steel prices.
These will likely be the challenges to this
mature industry through 2021.

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Products & Markets

Supply Chain | Products & Services | Demand Determinants


Major Markets | International Trade | Business Locations

Supply Chain

KEY BUYING INDUSTRIES


22111b

Nuclear Power in the US


Companies in this industry require various boiler and heat exchanger products for power
generation.

23799

Heavy Engineering Construction in the US


Companies in this industry demand shell and tube heat exchangers for an assortment of
general industry-specific products.

31141

Frozen Food Production in the US


Companies in this industry demand heat exchangers for refrigerators and freezers used in
frozen and refrigerated food production and transportation.

32411

Petroleum Refining in the US


Companies in this industry demand industry products, particularly boilers, as part of the
refining process.

32518

Inorganic Chemical Manufacturing in the US


Companies in this industry demand products like heat exchangers and boilers as part of the
manufacturing process.

32611

Plastic Film, Sheet & Bag Manufacturing in the US


Companies in this industry use heat exchangers to prepare raw materials necessary for
manufacturing.

33242

Metal Tank Manufacturing in the US


Companies in this industry require boiler and heat exchanging products for the construction of
many heavy gauge tanks, particularly those bound for the industrial manufacturing or
processing industries.

33341

Heating & Air Conditioning Equipment Manufacturing in the US


Companies in this industry require heat exchangers for the manufacturing of ventilation,
heating, air-conditioning and refrigeration equipment.

KEY SELLING INDUSTRIES


32551

Paint Manufacturing in the US


Companies in this industry supply paints, varnishes, lacquers, stains, shellacs and enamels to
industry firms.

33121

Metal Pipe & Tube Manufacturing in the US


Companies in this industry supply steel bars, bar shapes, steel concrete reinforcing bars, wide
flange steel structural beams and many other products of varying structure shapes and forms
for industry firms.

33142

Copper Rolling, Drawing & Extruding in the US


Companies in this industry supply copper and copper-base alloy pipe and tube (except
castings, forgings and other fabricated metal products) and all other copper and copper-base
alloy sheet, plate, foil and welded tubing to industry firms.

33151

Ferrous Metal Foundry Products in the US


Companies in this industry supply iron and steel castings (rough and semi-finished) to industry
firms.

33152

Nonferrous Metal Foundry Products Manufacturing in the US


Companies in this industry supply aluminum and aluminum-base alloy castings (rough or
semifinished) as well as other nonferrous castings (rough and semifinished) to industry firms.

33291

Valve Manufacturing in the US


Companies in this industry supply fabricated valves and pipes to industry firms.

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Products & Markets

Products & Services

Products and services segmentation (2016)

7.2%

Nuclear reactor
steam supply systems

14.3%

Power boilers and parts/attachments

15.0%
Other

63.5%

Heat exchangers and steam condensers

Total $7.2bn
Industry operators manufacture a wide
array of products including fabricated
heat exchangers and steam condensers,
water tube steel, fire tube steam and
other power boilers, nuclear reactor
supply systems including heat exchangers
and condensers and steel power boilers,
including their parts and attachments,
sold separately. Other goods and services
manufactured within the industry include
aftercoolers, barometric condensers,
boiler casings, economizers and
intercooler shells.
Heat exchangers and steam condensers
A heat exchanger is a device that ensures
efficient heat transfer from one fluid to
another. Heat exchangers are widely used
in refrigeration, air conditioning, space
heating, power production, petroleum
refineries and other chemical processing.
One common example of a heat
exchanger is the car radiator.
There are three types of heat
exchangers. The first type is the shell and
tube heat exchanger that consists of a
series of tubes, where fluid runs through
or over the tubes to be heated or cooled.
A second type of heat exchanger is the
plate heat exchanger that uses metal
plates to transfer heat between two fluids.

SOURCE: WWW.IBISWORLD.COM

The final type is the regenerative heat


exchanger where heat from a hot fluid is
intermittently stored before it is
transferred to the cold fluid, which then
absorbs the heat.
A steam condenser is a device that
maintains vacuum conditions on the
exhaust of an engine or turbine. It does
this by transferring heat to water or air
circulating it. Effectively, a steam
condenser is a closed space into which
steam exits a turbine and releases its
heat. It is necessary because it converts
the used steam back into water for return
to the steam generator.
Products in this segment are made in
sections, by casting each piece from steel
or iron ore in some cases. Product
components are then welded together,
often using automated orbital welding
machines. Manufacturers are increasingly
automating this process to increase
quality and efficiency. Products in this
segment are differentiated by their
features and end-user applications,
including size, performance, energy
efficiency, design specifications and the
types of metals used in the manufacturing
process. Heat exchangers and steam
condensers are anticipated to account for
63.5% of industry revenue in 2016.

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Products & Markets

Products & Services


continued

Demand
Determinants

Power boilers
Boilers are closed vessels in which water or
other fluids are heated for use in
applications and heating processes. Boilers
are normally heated by burning a fuel such
as wood, coal, oil or natural gas. Power
boilers use electrical resistance or
immersion type heating elements. There
are three main types of boilers. Fire tube
boilers burn fuels in order to heat a boiler
barrel that has a space for steam storage.
Water tube boilers have a series of water
tubes connected to large drums in which
steam is stored. Water tube boilers
generally have a higher rate of steam
production than fire tube boilers, but the
latter have greater storage capacity. The
third type of boiler is a potboiler in which
fire heats a partially filled pot of water from
below; these are characteristic of boilers
used in the eighteenth century, and they
are highly inefficient by current standards.
Also included in this segment are steel
power boilers and the parts and
attachments for steel power boilers, which
are frequently sold separately.
Manufacturers in this segment rely on
input materials including steel and iron ore
and parts, such as safety valves, water level
indicators, pressure gauges, steam traps
and circulating pumps, from upstream
manufacturers. Water tube steel, fire tube
steam and other power boilers are
anticipated to account for 14.3% of industry
revenue in 2016.

Nuclear reactor supply systems


Nuclear reactor boilers are powered by
sustained and controlled nuclear reactions
for the purposes of cooling and moderating
water at a high pressure. There are two
common types. The pressurized water
reactor has a vessel that is partially filled
with water and a steam bubble maintained
above it. The boiling water reactor boils
surrounding the fuel rods in the lower
section of the vessel to generate steam.
Nuclear reactor systems are only a
small proportion of the Boiler and Heat
Exchanger Manufacturing industry,
despite the United States originally being
a pioneer in this field. As demand for
energy increases, existing facilities are
being asked to produce more electricity as
very few new facilities are currently being
constructed. Nuclear reactor systems,
including heat exchangers and
condensers, are expected to account for
7.2% of industry revenue in 2016.

The Boiler and Heat Exchanger


Manufacturing industrys products are
manufactured for an assortment of uses
by a variety of market segments. The
diversity in applications for the industrys
products has resulted in demand being
determined by a number of factors.
Demand is primarily linked to the level of
production in downstream markets. As a
result, business activity in many sectors
including manufacturing, food and

beverage processing, utility services,


heating and air conditioning
manufacturing, heavy industrial facilities,
chemical and petrochemical
manufacturing and petroleum refining all
create demand for industry products.
Customer demand for industry
products is relatively insensitive to
changes in product pricing. This is
because industry products are a
necessary component of the customers

Other
The remaining industry revenue is
generated from aftercoolers, barometric
condensers, boiler casings, economizers
and intercooler shells, among other
products. A barometric condenser uses a
long, vertical pipe where water and other
liquids are removed by the pressure at the
end of the pipe. A boiler casing is a gastight structure surrounding parts of a
steam generator.

Boiler & Heat Exchanger Manufacturing in the USMarch 2016 15

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Products & Markets

Demand
Determinants
continued

manufacturing process, making them


relatively inelastic goods. Therefore,
when the industrys prices increase,
customer markets will continue to
purchase industry products in similar
quantities. Still, import competition
limits the extent to which prices can be
increased. Imported boilers and heat
exchangers, particularly those from the
Pacific Rim, pose a threat to domestically
produced products as they can be sold
more cheaply, potentially pricing
domestic goods out of the market.
Demand might be weakened because
of the long replacement cycle of many of
the industrys products. For example, the
economy may be performing strongly,
but enhanced industry demand does not
materialize because the products in
market circulation do not require
replacement. Due to the durability of
industry products, the majority of
demand arises from fresh construction
activity rather than replacement or
maintenance work. Increased world
demand for oil and gas also influences
demand for industry products. Oil and
gas distributors require these products to

service their downstream customers.


Therefore, an increase in demand for oil
and gas benefits boiler and heat
exchanger manufacturers.
Environmental concerns have caused
efficiency standards to come under
review in recent years. Just prior to the
five-year period, the US Department of
Energy increased efficiency standards for
residential boilers and furnaces. The
expected effect of the efficiency standards
on demand is mixed. While pressure for
increased product and service efficiency
within the industry is expected to result
in renewed demand for newer equipment
and increased service of existing
equipment, the resulting increases in
product price may stifle demand in the
residential sector. This is due to
consumers inability to meet rising
replacement costs. The effect of
government regulations and
recommendations on demand in this
industry is significant because the
technical nature of the product means
household consumers tend to rely on
information provided by official sources
when making purchase decisions.

Major Markets

Industrial sectors
The industrial sector is anticipated to
account for 37.0% of total industry revenue
in 2016. This includes chemical
manufacturing, the paper manufacturing
industry, food and beverage manufacturers
and the refining sector.
According to Energy and Environmental
Analysis Inc. (EEA), the chemicals sector
has more boilers and fuel input capacity
than other individual sectors. According to
the same source, the primary fuels for
boilers in this sector are natural gas,
by-products and coal. While the paper
sector relies on significantly fewer boilers
and heat exchangers than the chemicals

sectors, its fuel input capacity is relatively


similar. This indicates that the average size
of this sectors boilers is large. For example,
pulp mills require massive quantities of
steam for production, and so need loftier
boilers to meet production requirements.
The food sector, meanwhile, relies on
boilers and heat exchangers for activities
such as wet corn milling and
refrigeration, while the refining sector
uses steam to convert crude oil into
refined products. Other industries also
factor into this segment, including metal
product manufacturers with need for
heat exchange and boilers. IBISWorld
expects the industrial sector to remain

Boiler & Heat Exchanger Manufacturing in the USMarch 2016 16

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Products & Markets

Major Markets
continued

Major market segmentation (2016)

4.2%

Other markets

37.0%

23.6%

Export markets

Total $7.2bn

Industrial sector

35.2%

Commercial sector

the largest market for industry products


through 2021.
Commercial sector
The commercial sector is anticipated to
account for 35.2% of total industry revenue
in 2016. This includes healthcare facilities,
office buildings and education facilities that
use commercial boilers. According to the
EEA, commercial boilers at such facilities
account for much of the heat generation
capacity. Other building types that account
for a large share of revenue from the
commercial sector include warehouses and
retail establishments. Import competition
for this market segment is especially high,
as commercial buyers are often inclined to
buy the most affordable boilers available;
high performance boilers and heat
exchangers, typically manufactured in the
United States, are more important within
the industrial sector.

SOURCE: WWW.IBISWORLD.COM

Export markets
Exports of boilers and heat exchangers are
anticipated to account for 23.6% of total
industry revenue in 2016. The industrys
export destinations are diversified,
including neighboring Canada and Mexico
as well as far-away trade partners like
India and Australia. Despite rapid export
growth during the 2000s, exports have
recently slowed down due to the effects of
a strong dollar. A strong dollar makes US
exports more expensive in international
markets, limiting revenue from this
market. For more information on this
market, refer to the International Trade
section of this report.
Other markets include firms involved in
agriculture, mining and construction.
According to the EEA, the
nonmanufacturing sectors fuel input
capacity is less than one-fifth that of the
industrial sectors.

Boiler & Heat Exchanger Manufacturing in the USMarch 2016 17

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Products & Markets

Level & Trend


 xports in the
E

industry are H
 igh
and S
 teady
Imports

in the
industry are
Mediumand
Increasing

Industry trade balance


3
2
1

$ billion

Imports
Imports have grown rapidly over the past
five years, increasing by almost 50%
between 2014 and 2015 alone. By 2016,
imports are expected to reach $1.7 billion,
fulfilling nearly one-third of all domestic
demand for heat exchangers and boilers.
Imports from Korea have grown the most
rapidly over the period, with Korea and
China currently the largest sources of
imported boilers and heat exchangers.
The majority of imports are of the generic
variety, serving general industrial
purposes and competitive primarily on
the basis of price. China and South Korea
are also major global producers of steel,
the primary input into boilers and heat
exchangers; this boosts their
procurement and pricing advantage. On
the other hand, imports from Germany
and other European countries have been
declining as they are struggling, like US
operators, to compete with low-cost
Asian manufacturers of steel products.

International Trade

0
-1
-2
-3

Year 08

10

Exports

12

14

Imports

16

18

20

22

Balance
SOURCE: WWW.IBISWORLD.COM

Exports
Exports are also substantial, reaching an
estimated $1.7 billion by 2016. Canada is
the largest recipient of industry exports,
given its proximity and low trade barriers
with the United States, although a
growing share of industry exports is
destined to emerging markets in Mexico,

Exports To...

Imports From...

8.3%

Australia

10.3%

10.3%

Canada

India

45.7%

11.1%

13.3%

42.6%

Germany

Other

Other

Mexico

13.4%
China

20.4%
Korea

24.6%
Canada

Year: 2015

Total $1.7bn

SIZE OF CHARTS DOES NOT REPRESENT ACTUAL DATA

Total $1.7bn
SOURCE: USITC

Boiler & Heat Exchanger Manufacturing in the USMarch 2016 18

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Products & Markets

International Trade
continued

Korea, China, India and Malaysia.


Whereas the United States mainly imports
generic varieties, it exports high-quality
and high value-added varieties. Therefore,
exports command a price premium and
help boost the industrys average profit

margins. Unfortunately for operators,


however, export growth has faltered over
the past few years due to the strong US
dollar, which makes US-manufactured
products more expensive in key
international markets.

Boiler & Heat Exchanger Manufacturing in the USMarch 2016 19

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Products & Markets


Business Locations 2016

West
New
England

AK
0.0

Great
Lakes
WA

ND

MT

2.6

Rocky
Mountains
ID

OR
1.3

West NV
0.0

1.9

SD
0.0

WY

0.3

MN

0.0

0.0

Plains

CO

0.0

KY

1.0

OK
13.3

NC
2.3

TN

AZ

NM

0.3

1.0

Southwest
TX
12.3

HI
0.0

Additional States (as marked on map)


1 VT

2 NH

3 MA

4 RI

5 CT

6 NJ

7 DE

8 MD

0.3
1.0

0.6

2.6

1.6

0.3

SC

Southeast

0.0

MS

AL
1.0

0.3

GA
1.9

1.0

LA
2.9

FL
2.3

Establishments (%)

0.0

0.3

AR

0.6

1.3

7.1

WV VA
3.6

1.3

1.3

CA

West

5.8

MO

KS

1.0

OH

1.3

3.9

3.9

IN

IL

0.3

UT

PA

2.3

0.3

0.0

1 2
3
NY
9.1
5 4

MI

4.5

IA

NE

0.0

WI

ME

MidAtlantic

9 DC
0.0

Less than 3%
3% to less than 10%
10% to less than 20%
20% or more
SOURCE: WWW.IBISWORLD.COM

Boiler & Heat Exchanger Manufacturing in the USMarch 2016 20

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Products & Markets

Southeast
The Southeast region accounts for 18.4%
of industry establishments and is the most
populous region in the United States. This
high percentage of establishments can be
best explained by the desire of
manufacturers to lower their
transportation costs. By locating their
facilities close to a large customer base,

30

20

10

Southwest

Southeast

Plains

New England

Rocky Mountains

Establishments

Mid-Atlantic

0
Great Lakes

Southwest
The Southwest region accounts for 26.9%
of the industrys establishments. The
concentration of boiler and heat
exchanger manufacturers in the
Southwest is largely due to the
dominance of Oklahoma and Texas.
Oklahoma has a higher concentration of
establishments than any other state,
accounting for 13.3% of total
establishments in the United States.
Oklahomas manufacturing economy has
always been based primarily in
agricultural and petroleum production.
Since early in the 20th century, the
food-processing and petroleum-refining
industries accounted for at least onethird of total manufacturing revenue.
With food production constituting a large
major market for this industry, it follows
that the boiler and heat exchanger
manufacturing industry would locate
near a primary downstream buyer. Texas
boasts the second highest concentration
of industry establishments in the country,
with 12.3% of the total. Texas is a
national leader in industrial product
manufacturing, refined petroleum,
industrial organic chemicals, oil-field
machinery and other petrochemical
industry sub-sectors, all of which are
downstream industries for boiler and
heat exchanger manufacturers.

Distribution of establishments vs. population

West

The regions with the greatest


concentration of boiler and heat
exchanger manufacturing establishments
include the Southwest, Southeast,
Mid-Atlantic and Great Lakes.

Business Locations

Population
SOURCE: WWW.IBISWORLD.COM

manufacturers can increase profit margins


and competitiveness in comparison with
other industry operators.
Mid-Atlantic
The Mid-Atlantic region accounts for
16.2% of industry establishments. The
Mid-Atlantic region has access to some of
the largest seaports in the United States,
making it an attractive location for
manufacturing industries to receive raw
materials and ship exports. New York has
the third highest percentage of
establishments in the country, despite a
recent drop in revenue from heat
exchangers and steam condensers in the
state. Increasing revenue from the boiler
segment in New York has mitigated some
of these losses.
Great Lakes
The Great Lakes region accounts for
17.8% of industry establishments. The
Great Lakes region is a large
manufacturing hub in the United States,
with a myriad of manufacturing
industries choosing to locate in the
region. As downstream manufacturing
industries are among the Boiler and Heat

Boiler & Heat Exchanger Manufacturing in the USMarch 2016 21

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Products & Markets

Business Locations
continued

Exchanger Manufacturing industrys


major market segments, it is not
surprising that a large number of
industry operators choose to locate in the
region. Starting in the 1980s, Ohio
became the nations leader in machine-

tool manufacturing, the second leading


steel producer and a pioneer in oil
refining. Additionally, the Great Lakes
region has the added advantage of being
close to Canada, a popular destination for
industry exports.

WWW.IBISWORLD.COM

Boiler & Heat Exchanger Manufacturing in the US March 2016

22

Competitive Landscape

Market Share Concentration | Key Success Factors | Cost Structure Benchmarks


Basis of Competition | Barriers to Entry | Industry Globalization
Market Share
Concentration
Level
Concentration

in
this industry is L ow

Key Success Factors


IBISWorld

identifies
250 Key Success
Factors for a
business. The most
important for this
industry are:

Cost Structure
Benchmarks

Market share concentration within the


Boiler and Heat Exchanger
Manufacturing industry is low, with the
top four producers accounting for less
than 20.0% of total industry revenue in
2016. The level of concentration within
the industry has remained stable in
recent years. However, there has been a
significant amount of merger and
acquisition (M&A) activity over the
five-year period. Tempering the impact of
M&A has been SPX Corporations
declining focus on the United States for
manufacturing revenue.

The industry is characterized by a


large number of medium-size
businesses, with an estimated 295
companies in 2016; this ensures that no
company dominates the market.
Fragmentation is also aided by the high
level of specialization of companies, as
most companies cater to different
markets and technologies. Given the
broad range of markets served by
industry manufacturers, differences in
comparative advantages between firms
will keep the industry fragmented
through 2021.

Access to the latest available and most


efficient technology and techniques
Access to the latest technology is required
for firms to make improvements in
product capabilities and specifications.
Efficiency standards have made
technological improvements a critical
success factor in this industry.

in specifying their needs and in


determining the appropriate products to
meet those needs.

Reliability of supply
Accessibility and reliability of service is
important to many customer markets,
particularly for purchases of replacement
parts and maintenance services.

Development of new products


Production innovation and product
design expertise are crucial for a firms
success in this industry. Continuing
success is achieved through an emphasis
on research and development.

Highly trained workforce


Firm success depends on the skill of
engineering, technical and marketing
employees who actively assist customers

Reputation for quality and branding


To gain business, manufacturers must
build quality into their products,
materials, specifications, safety
features, parts, delivery and service.
Firms that have well-known brand
names have an edge when trying to
obtain new customers.

Profit
Industry profit, measured as earnings
before interest and tax, is expected to reach
6.2% of industry revenue in 2016. Profit
has generally moved in tandem with the
price of steel, the major input into boiler
and heat exchanger manufacturing,
because operators have been able to pass
these prices downstream via higher selling
prices. Profit exceeded 7.0% of revenue in

2011, when high global demand and limited


global supply caused steel prices to soar,
enabling operators to raise the selling price
of boilers and heat exchangers. Steel prices
and selling prices have since declined,
weighing down this industrys profit
margins. Still, IBISWorld expects profit
margins to level off through 2021, even as
global demand for steel raises the price of
the metal once more.

WWW.IBISWORLD.COM

Boiler & Heat Exchanger Manufacturing in the US March 2016

23

Competitive Landscape

Purchases
Purchases of raw materials are the largest
expense for the Boiler and Heat
Exchanger Manufacturing industry,
accounting for an estimated 47.4% of
revenue in 2016. This is typical for
manufacturing industries because
operators require a significant volume of
raw materials to produce final outputs,
including steel, iron ore and alloys. In
turn, purchase costs fluctuate with the
cost of these inputs.
Purchase costs also vary within the
industry depending on the product being
manufactured. Raw material costs are
higher for manufacturers producing large
volumes, while labor and capital costs
tend to represent a greater portion of
overall costs for manufacturers of more
complex products. Other major drivers of
cost structure in the industry include
prices of rubber, corrugate, paint,
electricity and natural gas. Some firms

throughout the industry have begun to


source castings, valves and machined
parts from Asia in order to reduce
purchase costs.
Wages
Wages are a significant cost to the
industry because labor is an integral
part of the production process. Wages
as a share of revenue have declined
over the five-year period, falling to
20.1% by 2016. As a result of industry
consolidation trends, the workforce
has become more productive and
skilled, reducing labors share of
revenue slightly. However, most
workers on the production side of the
industry now have specialist
metalworking and metal forming
experience while some have a greater
focus on design and installation issues;
this has increased the average wage
per worker over the period.

Sector vs. Industry Costs


Average Costs of
all Industries in
sector (2016)
100

Industry Costs
(2016)

60

n Profit
n Wages
n Purchases
n Depreciation
n Marketing
n Rent & Utilities
n Other

6.2

7.1
11.1

20.1

80

Percentage of revenue

Cost Structure
Benchmarks
continued

56.0

47.4

40

20

2.4

2.6
19.9

0.9

1.3

1.8

0.2

23.0

0
SOURCE: WWW.IBISWORLD.COM

WWW.IBISWORLD.COM

Boiler & Heat Exchanger Manufacturing in the US March 2016

24

Competitive Landscape

Cost Structure
Benchmarks
continued

Depreciation and other costs


Depreciation is expected to account for
1.8% of revenue in 2016. This reflects the
slow wear-and-tear rate of machinery
used by operators. Depreciation is
expected to remain relatively low through

2021. Rent and utility costs are also low,


at about 1.3% of revenue, while
marketing costs are negligible. Other
expenses include restructuring, selling
and administration, legal expenses and
goodwill adjustments, among others.

Basis of Competition

The Boiler and Heat Exchanger


Manufacturing industry has a medium
level of competition. Competition primarily
stems from product performance
attributes; price is also a primary basis of
competition among generic products.
There are an estimated 255 companies in
the industry, which compete internally for
market share. Industry operators also face
stiff external competition from imported
products, from manufacturers in East Asia
and elsewhere.

Technological innovation, through


internal research and development,
enables firms within the industry to
enhance performance attributes of their
products, extending possible product use
and allowing them to establish a higher
degree of differentiation.
Consistency of this quality, reliability
of delivery times and the provision of
additional services, particularly design
advice, provide players with other means
to stand out among the competition.
Contracts are awarded on a competitive
bid basis to those with the ability to
design, construct and install boilers and
heat exchangers, helping to explain the
medium level of competition in the
industry. Industry operators set prices to
cover direct costs plus a percentage profit
contribution, while many firms
frequently set different price structures
for each market that they sell to.

Level & Trend


 ompetition
C

in
this industry is
Mediumand the
trend is I ncreasing

Internal competition
The major competitive factors in the
industry are price, quality and efficiency
in designing, constructing and installing
boilers and heat exchangers. Price is one
of the most important factors; the
majority of industry products are sold to
food and beverage processors and
industrial nonbuilding construction
firms, which are always looking to
decrease costs. Within the industry, there
is a low level of concentration, with the
four largest players collectively
accounting for only about one-third of
total revenue. This prevents any industry
manufacturer from raising its prices
significantly, because downstream firms
can easily switch to a different industry
operator for their purchases.
Besides price, customers look for
quality products to increase the value of
their purchases. Product performance
attributes, including strength to weight
ratios, waterproof ability, malleability,
corrosive performance, safety,
installation costs and recyclability,
influence competition among firms.

External competition
Boiler and heat exchanger manufacturers
compete with imported products sold
domestically. Import penetration has risen
rapidly over the past five years, despite
moderately high tariffs on imports.
Imports are typically cheaper and exert
price-based competition on industry
operators, limiting revenue growth and
pressuring profit. Import growth has also
been aided by an appreciating dollar,
which makes imported goods even
cheaper in the US market.
Unlike other industries, imports for
the Boiler and Heat Exchanger
Manufacturing industry are spread
relatively evenly among a number of

WWW.IBISWORLD.COM

Boiler & Heat Exchanger Manufacturing in the US March 2016

25

Competitive Landscape

Basis of Competition
continued

different countries. Still, East Asian


countries, including Korea and China,
generate the most competition.

Barriers to Entry

The Boiler and Heat Exchanger


Manufacturing industry has moderate
barriers to entry, given the medium level of
capital required to start a new business. The
industry is in the mature stage of its
industry life cycle; therefore, growth in the
number of entrants has decreased.
However, competition continues to remain
high as there are still a significant number
of operators in the industry, with an
estimated 255 companies in 2015.
The level of industry assistance is at a
medium level, given a number of different
tariffs relating to industry products. These
actions protect domestic producers
somewhat from import competition (see
the Industry Assistance section for further
information). Furthermore, legislation
surrounding the design, construction and
installation of boiler systems and heat
exchangers has the effect of limiting
competition. Stringent safety and
production regulations have restricted entry
into the industry.
Start-up costs vary depending on the
scale of operations and the manufacturing
location. However, obtaining a viable
manufacturing facility, combined with
necessary plant and equipment
maintenance and upgrades, are very
significant costs for every company. These
expenses deter some firms from entering
the industry. Additionally, given tight
commercial lending conditions in the
United States in recent years, securing the
necessary capital to begin operations is
another significant barrier to entry.
Skilled labor is an important
requirement for entering the industry.
Industry skills are often developed through
apprenticeship programs, trade or technical
school diplomas and employer-provided
training and development. Apprenticeship

Level & Trend


 arriers to Entry
B

in this industry
are M
 ediumand
Increasing

Competition from these countries is


expected to rise through 2021, limiting
revenue projections for this industry.

Barriers to Entry checklist


Competition
Concentration
Life Cycle Stage
Capital Intensity
Technology Change
Regulation & Policy
Industry Assistance

Medium
Low
Mature
Low
Medium
Medium
Medium
SOURCE: WWW.IBISWORLD.COM

programs usually consist of four years of


on-the-job training. Experienced
boilermakers often attend apprenticeship
classes or seminars to learn about new
equipment, procedures and technology.
Overall, the skill set required by industry
positions is readily available in the
workforce, and the barrier formed is
primarily the time requirement for
individuals to gain the required skill set.
Once new operators have entered the
industry, the barriers to success are
heightened. Companies typically experience
losses for the first three to five years of
operation, given the time necessary to build
locations and gain customers. This period is
also necessary for firms to achieve
economies of scale and reduce average
costs enough to competitively price
products. Existing businesses may also
have long-term contracts established to
supply industry products to various
downstream industries, representing a
major barrier to success. Furthermore,
large research and development costs are
necessary for product innovation. In order
to effectively compete, an entrant should
be committed to spending a significant
amount on developing new product lines
in order to differentiate themselves from
their competitors.

WWW.IBISWORLD.COM

Boiler & Heat Exchanger Manufacturing in the US March 2016

26

Competitive Landscape

in
this industry is
Highand the trend
is I ncreasing

International trade is a
major determinant of
an industrys level of
globalization.
Exports offer growth
opportunities for firms.
However there are legal,
economic and political risks
associated with dealing in
foreign countries.
Import competition can
bring a greater risk for
companies as foreign
producers satisfy domestic
demand that local firms
would otherwise supply.

Trade Globalization
200

Going Global: Boiler & Heat Exchanger


Manufacturing 2004-2016
Global

Export

150
100
50
0 Local
0

United States and acquiring foreign


companies to increase their presence
abroad. For example, in 2012, Modine
Manufacturing Company completed the
acquisition of the Canadian Geofinity
Manufacturing. SPX, the second largest
industry operator, has also been heavily
diversifying into international markets.
Chart Industries, a smaller yet growing
company, has been opening manufacturing
facilities in China, Germany and East
Europe to cater to growing industrial
demand in those regions. IBISWorld
expects industry globalization to remain
high through 2021.

Boiler & Heat Exchanger


Manufacturing
Import
40

80

120

Imports/Domestic Demand

160

200 Export

Exports/Revenue

Level & Trend


 lobalization
G

The Boiler and Heat Exchanger


Manufacturing industry exhibits a high
level of globalization, as evidenced by
trade levels. Exports are substantial,
generating almost one-fourth of industry
revenue in 2016. Import levels are even
higher, coming from Canada, Germany,
East Asia and elsewhere, and fulfilling
close to one-third of all domestic demand
for boilers and heat exchangers.
In addition, although the two major
players are based in the United States, they
have significant international presence.
They are deriving larger portions of
revenue from operations outside the

Exports/Revenue

Industry
Globalization

Global

150
100
50

2004

0 Local
0

2016
Import
40

80

120

160

Imports/Domestic Demand
SOURCE: WWW.IBISWORLD.COM

Boiler & Heat Exchanger Manufacturing in the USMarch 2016 27

WWW.IBISWORLD.COM

Major Companies

Modine Manufacturing Company | Other Companies

Major players
(Market share)

93.8%
Other

Modine Manufacturing Company 6.2%

Player Performance
Modine
Manufacturing
Company
Market share: 6.2%

SOURCE: WWW.IBISWORLD.COM

Modine Manufacturing Company was


founded in 1916 and has since grown to
become a global leader in heating and
cooling technology. Based in Racine,
WI, the company supplies products to a
range of markets, including automotive
manufacturers (light, medium and
heavy-duty trucks), commercial HVAC
equipment manufacturers, refrigeration
systems manufacturers, agricultural
and construction machinery producers
and industrial equipment
manufacturers. The company also has a
growing interest in serving the fuel cell
technology and electrical equipment
markets. According to the latest
available data, the company employs
6,900 individuals. While about half of
the companys revenue originates from
the United States, Modine has
increasingly been generating larger

portions of revenue from abroad. In


fiscal 2015 (latest available data),
Modine generated $1.5 billion in
consolidated revenue.
Modine owns two global state-of-theart technology centers dedicated to
developing and testing products and
technologies. Over the past year, the
company spent over $60.0 million on
product and technology research and
development initiatives. Despite
increased price pressures from foreign
producers, Modine intends to remain
competitive through product quality
derived from these investments in
technological advancements. Many of
Modines technologies are proprietary,
difficult to replicate and patent protected.
This helps the company fortify its
position within the Boiler and Heat
Exchanger Manufacturing industry.

Modine Manufacturing Company (industry-specific operations) - financial


performance*
Revenue
($ million)

(% change)

Operating Income
($ million)

2010-2011

519.6

N/C

15.4

N/C

2011-2012

522.4

0.5

22.5

46.1

2012-2013

493.7

-5.5

-0.4

N/C

2013-2014

530.2

7.4

13.3

N/C

2014-2015

468.1

-11.7

16.5

24.1

2015-2016

441.1

-5.8

-2.5

N/C

Year**

*Year-end March, **Estimates

(% change)

SOURCE: ANNUAL REPORT AND IBISWORLD

Boiler & Heat Exchanger Manufacturing in the USMarch 2016 28

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Major Companies

Player Performance
continued

Financial performance
Over the five years to fiscal year 2016,
the companys US industry-specific
revenue is expected to decrease an
annualized 3.2% to $441.1 million.
However, this conceals significant
annual discrepancy, mirroring the wider
industry. Revenue grew rapidly

following improved demand and rising


metal prices before falling again with
metal prices and weaker demand.
However, revenue is expected to
improve slightly over fiscal 2016 due to
volume improvements and stronger
industrial markets. Profit is projected to
remain modest, at 3.5% of revenue.

Other Companies

Alfa Laval AB

global multi-industry manufacturer with


operations in more than 35 countries and
a workforce of more than 14,000
employees. The company focuses on
supplying highly specialized engineered
solutions, including heat exchange and
cooling systems, to industrial buyers.
SPX generated $4.7 billion in
consolidated revenue over 2014 (latest
available data).
The company splits its operations
among three segments: HVAC, detection
and measurement and power. SPX
formerly operated in the Boiler and Heat
Exchanger Manufacturing industry
through its thermal equipment and
services segment. However, the company
sold off its thermal products solutions
business in the first quarter of 2014 and
subsequently aggregated its other
businesses. Through the new HVAC
segment, the company manufactures and
services heat transfer products, which
include cooling systems, heat exchangers
and boilers, for a range of downstream
markets. Over the five years to 2016, SPX
Corporations US industry-specific
revenue is expected to decline an
annualized 22.1% to $231.0 million,
primarily due to the aforementioned sale
and aggregation. In addition, the
companys industry-specific operating
income is also anticipated to decline
rapidly over the period, falling below
4.0% of revenue. The company references
declining demand from the power
generation market and increased
competition from Chinese manufacturers

Estimated market share: 4.5%


Alfa Laval AB, founded in 1883, is a
Swedish company and a global player with
a US-based subsidiary. The group sells its
products using the brands Tri-Clover,
Contherm, Sharples, Merco, Standard
Refrigeration and Ketema. These products
include centrifuges, pumps and valves and
heat exchangers. Alfa Laval focuses on
environmental protection, food production
and energy optimization through its heat
transfer, separation and fluid-handling
technologies. The company has over 2,000
patents and launches between 35 and 40
new products each year.
Alfa Laval relies on acquisitions for
sustained revenue growth. Just prior to
the five-year period, Alfa Laval acquired
the Standard Refrigeration and Ketema
brands of shell-and-tube heat
exchangers, condensers and other
heat-transfer equipment. These product
names are well known within the
commercial and industrial refrigeration
and industrial process markets in North
America. Further, Alfa Laval acquired
Champ Products to improve its
penetration in the North American
automotive market. IBISWorld expects
revenue from boiler and heat exchanger
manufacturing in the United States to
reach $318.8 million by 2016.

SPX

Estimated market share: 3.2%


Headquartered in Charlotte, NC, SPX
Corporation was founded in 1912 and is a

Boiler & Heat Exchanger Manufacturing in the USMarch 2016 29

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Major Companies

Other Companies
continued

as reasons for declining revenue and


profit in recent years. This has caused the
company to increasingly turn to global
markets, further reducing its market
share in the United States.

Chart Industries

Estimated market share: 3.1%


Chart Industries Inc. is a global
manufacturer of production and storage
equipment for hydrocarbon and
industrial gas manufacturers employing a
workforce of 5,000. The Garfield Heights,
OH-based company was founded in 1992
and its products include vacuuminsulated containment vessels, heat
exchangers, cold boxes, cryogenic
systems and liquefied gas systems, for
use in energy markets. The company has
aggressively pursued growth by acquiring
smaller manufacturers of complementary
product lines, including Cryotech, a San
Jose, CA-based manufacturer of dosing
systems for food and beverage packaging

applications, and Clever Fellows


Innovation Consortium, a developer and
manufacturer of technology products for
cryogenic and heat transfer applications.
Chart Industries participates in the
industry via its energy and chemicals
segment, which supplies engineering
equipment used in the separation,
liquefaction and purification of industrial
gases. Principal products include brazed
aluminum heat exchangers, air cooled
heat exchangers and cold boxes. By 2016,
revenue from these operations in the
United States is expected to reach $223.1
million, representing rapid growth over
the past five years. Revenue has been
boosted by the popularity of brazed
aluminum heat exchangers, a main
offering of the company. Sales volumes in
the companys air-cooled heat exchanger
and process system product lines have
been more stable. IBISWorld expects
Chart Industries to capture growing
market share over the next five years.

Boiler & Heat Exchanger Manufacturing in the USMarch 2016 30

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Operating Conditions

Capital Intensity | Technology & Systems | Revenue Volatility


Regulation & Policy | Industry Assistance
Capital Intensity
Level
The level

of capital
intensity is L ow

The Boiler and Heat Exchanger


Manufacturing industry operates with a
low level of capital intensity. IBISWorld
estimates that for every $1.00 spent on
wages, the industry will allocate $0.09 in
capital investment in 2016. While the
cost of new plants and equipment is
large, and product innovation
necessitates regular investment in new
technology, skilled labor represents a
much larger cost to the industry in
general, keeping capital intensity low.
Still, capital intensity varies across
firms and is dependent on a firms size
and the sophistication of its technology.
A firms capital intensity is also
influenced by the markets it serves.
Certain markets are more resource
intensive because the projects require

Capital intensity

Capital units per labor unit


0.5
0.4
0.3
0.2
0.1
0.0

Economy

Manufacturing

Boiler & Heat


Exchanger
Manufacturing

Dotted line shows a high level of capital intensity


SOURCE: WWW.IBISWORLD.COM

more engineering and manufacturing


support. The majority of capital
expenditure is directed toward

Tools of the Trade: Growth Strategies for Success


Investment Economy

Recreation, Personal Services,


Health and Education. Firms
benefit from personal wealth so
stable macroeconomic conditions
are imperative. Brand awareness
and niche labor skills are key to
product differentiation.

Information, Communications,
Mining, Finance and Real
Estate. To increase revenue
firms need superior debt
management, a stable
macroeconomic environment
and a sound investment plan.

Heating & AirConditioning


Contractors

Traditional Service Economy


Wholesale and Retail. Reliant
on labor rather than capital to
sell goods. Functions cannot
be outsourced therefore firms
must use new technology
or improve staff training to
increase revenue growth.

Capital Intensive

Labor Intensive

New Age Economy

Heavy
Engineering
Construction
Paint Manufacturing
Metal Tank
Manufacturing
Nuclear Power

Boiler & Heat


Exchanger
Manufacturing

Change in Share of the Economy

Old Economy
Agriculture and Manufacturing.
Traded goods can be produced
using cheap labor abroad.
To expand firms must merge
or acquire others to exploit
economies of scale, or specialize
in niche, high-value products.
SOURCE: WWW.IBISWORLD.COM

Boiler & Heat Exchanger Manufacturing in the USMarch 2016 31

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Operating Conditions

Capital Intensity
continued

purchasing new or upgrading existing


manufacturing equipment, while the
remaining funds are invested into
facilities and other structures.
Firms that are oriented toward custom
fabrication tend to rely on a highly skilled
workforce that necessitates higher wages.
In addition, skilled labor has become
necessary for operating the advanced

Technology & Systems Technological change in the industry has


Level
The level

of
Technology Change
is M
 edium

Revenue Volatility
Level
The level

of
Volatility is M
 edium

manufacturing technology used in the


industry, elevating the industrys
average wage to an estimated $64,003
by 2016. Revenue per employee, a proxy
for labor productivity, has been trending
upward over the past decade; these
productivity improvements also help to
explain the industrys increasing total
wage expenses.

been at a medium level over the past 10


years. Advancements have largely
focused on maintaining a competitive
cost structure by controlling
manufacturing and operating expenses.
Additionally, technological change has
focused on increasing standardization,
improving the information technology
infrastructure and, to a smaller extent,
product development.
Nonetheless, costs are kept relatively
high as manufacturers activities are often
redesigned in response to changes in
customer requirements, requiring changes
in technology to efficiently respond to
these alterations. The introduction of new
regulation similarly affects the industry as
changing government regulation can
require significant changes to the
manufacturing process.

Firms within this industry group


maintain manufacturing facilities with
computerized, numerically controlled
grinding, welding, painting and assembly
capabilities. Computer-assisted design
and manufacturing has become a central
technology in this industry, reducing
time from design to production. This is
especially significant for large boilers and
heating installations, which are often
custom designed. Plate type heat
exchangers have previously only been
used in small, low-pressure applications,
such as on oil coolers for engines.
However, new improvements in gasket
and overall heat exchanger design have
allowed some large-scale applications of
the plate type heat exchanger. As
facilities are upgraded or new facilities
built, large plate type heat exchangers are
replacing tube and shell heat exchangers.

This industry has exhibited moderate


revenue volatility in the five years to 2016.
Revenue volatility reflects changes in the
price and the level of output that the
industry produces and sells. In turn, output
and pricing depend on the level of demand
for industry products. Through 2012
revenue increased, propelled by greater

industrial demand and high metal product


prices. Unfortunately for operators,
revenue has slowed thereafter due to
moderating demand and falling metal
prices; this trend is expected to continue
through 2016. Industry revenue volatility
will continue to depend on industrial and
metals markets through the next five years.

Boiler & Heat Exchanger Manufacturing in the USMarch 2016 32

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Operating Conditions

A higher level of revenue


volatility implies greater
industry risk. Volatility can
negatively affect long-term
strategic decisions, such as
the time frame for capital
investment.
When a firm makes poor
investment decisions it
may face underutilized
capacity if demand
suddenly falls, or capacity
constraints if it rises
quickly.

Volatility vs Growth
1000

Revenue volatility* (%)

Revenue Volatility
continued

Hazardous

Rollercoaster

100
10

Boiler & Heat Exchanger


Manufacturing

1
0.1

Stagnant
30

10

Blue Chip
10

30

50

70

Five year annualized revenue growth (%)


* Axis is in logarithmic scale
SOURCE: WWW.IBISWORLD.COM

Regulation & Policy


Level & Trend
 he level of
T

Regulation is
Mediumand the
trend is I ncreasing

The foundations of product standards


are obtained on either a national or
international basis. Nationally, the
American National Standards Institute
defines product specifications. The
International Standards Organization
handles international product
standards. As public policy has
developed to reflect societys increasing
concern with environmental issues,
manufacturers have shifted toward
producing low-emission and more
efficient products. Environmental
requirements have the potential to
eliminate firms from the tendering or
bidding process if products fail to meet
emission standards. In late 2007, the
US Department of Energy increased
efficiency standards for residential
boilers and furnaces. The final rule
became effective in January 2008 and
prescribes the following standard levels

applicable to products manufactured on


or after November 19, 2015.
These new standards are not expected
to have a significantly adverse impact on
revenue because the residential market
constitutes a relatively small proportion
of the market for this industry compared
with industrial and commercial markets.
However, the trend of increasing
efficiency standards is expected to
continue for the industrial sector, so
firms that are better equipped to meet
high annual fuel utilization efficiency
standards will be in a superior position to
win contracts in the tendering process. In
addition to efficiency regulation, firms in
this industry are subject to a variety of
non-environmental regulation. Included
in these are occupational health and
safety, wage, overtime and other
employment matters with state and
federal government agencies.

Boiler & Heat Exchanger Manufacturing in the USMarch 2016 33

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Operating Conditions

Industry Assistance
Level & Trend
 he level of Industry
T

Assistance is
Mediumand the
trend is S
 teady

Direct assistance
This industry receives a moderate level of
direct assistance in the form of tariffs on
imports; tariffs make imports artificially
expensive, reducing import penetration
in the domestic market. Tariff levels for
this industry vary depending on relations
and agreements between the United
States and trading partners. There are
numerous free trade agreements with
certain nations that apply to the imported
products of this industry. Some of the
nations that observe free trade
agreements with the United States
include Australia, Bahrain, Bolivia,
Canada, Chile, Colombia, the Dominican
Republic, Ecuador, Israel, Jordan, Peru,
Morocco and Singapore.
The majority of boiler and heat
exchanger products imported into the
United States incur a normal tariff
relations duty of between 3.3% and 5.2%.
Some examples of tariffs applicable to
industry products include: watertube
boilers with a steam production
exceeding 45 tons per hour (imported
from Canada and Italy) which incur a
5.2% NTR duty rate; vapor-generating
boilers, including hybrid boilers
(imported from Canada and China)
which incur a 5.2% NTR duty rate;
super-heated water boilers (imported

from China and South Korea) which


incur a 3.3% NTR duty rate; parts of
steam or other vapor-generating boilers
(imported from Canada and Korea)
which incur a 4.3% NTR duty rate; and
brazed aluminum plate-fin heat
exchangers which incur a 4.2% NTR duty
rate or a 35.0% non-NTR duty rate.
Indirect assistance
Industry associations that represent boiler
and heat exchanger manufacturers include
the Steel Tank Manufacturers Institute,
Heat Transfer Research Inc., the Tubular
Exchanger Manufacturers Association
Inc., the Gas Appliance Manufacturers
Association, the American Boilers
Manufacturing Association and the
American Council for an Efficient-Energy
Economy. These associations represent
the interests of firms in this industry by
providing them with information about
industry-specific market conditions and
emerging market trends. Additionally,
these associations provide general
information and advice on legislation
impacting firms in this industry. They
provide a collective voice for industry
operators by lobbying for their interests in
the case of industrial disputes and changes
to the current operating environment via
legislative change.

WWW.IBISWORLD.COM

Boiler & Heat Exchanger Manufacturing in the US March 2016

34

Key Statistics
Industry Data
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
Sector Rank
Economy Rank

Industry
Value Added
($m)
1,676.6
1,895.6
1,978.2
1,618.3
1,820.6
2,043.7
2,170.9
2,133.5
2,041.6
2,011.7
2,058.1
2,100.8
2,119.2
2,120.8
2,124.7
135/193
756/1370

Establishments
311
305
317
300
323
317
309
314
300
295
299
299
303
300
303
148/193
1075/1370

Enterprises Employment
281
20,941
263
22,385
269
21,489
253
19,372
270
21,385
266
24,160
266
24,144
269
24,166
258
22,805
253
22,471
257
23,071
256
23,417
260
23,678
257
23,720
259
23,831
143/193
128/193
1040/1370
808/1370

Exports
($m)
1,288.5
1,498.9
1,353.6
1,222.1
1,537.6
1,957.8
1,809.4
1,773.4
1,691.0
1,687.3
1,738.4
1,696.7
1,702.3
1,722.2
1,719.5
107/180
141/432

Imports
($m)
1,753.7
2,066.2
2,209.2
1,538.9
1,278.9
1,606.9
1,721.4
1,716.1
2,262.4
1,657.1
1,750.3
1,843.3
1,785.6
1,642.2
1,737.4
130/180
177/432

Wages
($m)
1,236.3
1,365.5
1,380.8
1,289.5
1,401.2
1,485.5
1,530.8
1,578.5
1,464.2
1,438.2
1,481.1
1,507.5
1,524.9
1,527.3
1,534.1
112/193
690/1370

Domestic
Demand
6,580.9
7,634.6
7,211.2
6,403.8
6,398.9
7,093.0
7,442.0
7,985.9
7,880.9
7,132.8
7,376.5
7,654.1
7,657.2
7,497.4
7,613.7
153/180
211/432

World price
of steel
(Index)
182.9
220.6
165.2
191.7
216.2
208.0
194.8
200.1
178.6
177.5
200.1
211.4
212.7
210.2
212.2
N/A
N/A

Industry
Revenue Value Added
(%)
(%)
15.6
13.1
-10.1
4.4
-4.2
-18.2
9.4
12.5
11.8
12.3
1.2
6.2
6.8
-1.7
-9.1
-4.3
-2.0
-1.5
2.8
2.3
1.9
2.1
0.9
0.9
0.0
0.1
0.2
0.2
172/193
151/193
1301/1370 1243/1370

Establishments
(%)
-1.9
3.9
-5.4
7.7
-1.9
-2.5
1.6
-4.5
-1.7
1.4
0.0
1.3
-1.0
1.0
151/193
1223/1370

Enterprises Employment
(%)
(%)
-6.4
6.9
2.3
-4.0
-5.9
-9.9
6.7
10.4
-1.5
13.0
0.0
-0.1
1.1
0.1
-4.1
-5.6
-1.9
-1.5
1.6
2.7
-0.4
1.5
1.6
1.1
-1.2
0.2
0.8
0.5
159/193
146/193
1234/1370 1234/1370

Exports
(%)
16.3
-9.7
-9.7
25.8
27.3
-7.6
-2.0
-4.6
-0.2
3.0
-2.4
0.3
1.2
-0.2
101/180
293/432

Imports
(%)
17.8
6.9
-30.3
-16.9
25.6
7.1
-0.3
31.8
-26.8
5.6
5.3
-3.1
-8.0
5.8
179/180
430/432

Wages
(%)
10.5
1.1
-6.6
8.7
6.0
3.0
3.1
-7.2
-1.8
3.0
1.8
1.2
0.2
0.4
155/193
1279/1370

Domestic
Demand
(%)
16.0
-5.5
-11.2
-0.1
10.8
4.9
7.3
-1.3
-9.5
3.4
3.8
0.0
-2.1
1.6
178/180
430/432

World price
of steel
(%)
20.6
-25.1
16.0
12.8
-3.8
-6.3
2.7
-10.7
-0.6
12.7
5.6
0.6
-1.2
1.0
N/A
N/A

Revenue
($m)
6,115.7
7,067.3
6,355.6
6,087.0
6,657.6
7,443.9
7,530.0
8,043.2
7,309.5
7,163.0
7,364.6
7,507.5
7,573.9
7,577.4
7,595.8
149/193
748/1370

Annual Change
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
Sector Rank
Economy Rank

Key Ratios
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
Sector Rank
Economy Rank

IVA/Revenue
(%)
27.41
26.82
31.13
26.59
27.35
27.45
28.83
26.53
27.93
28.08
27.95
27.98
27.98
27.99
27.97
43/193
772/1370

Imports/
Demand
(%)
26.65
27.06
30.64
24.03
19.99
22.65
23.13
21.49
28.71
23.23
23.73
24.08
23.32
21.90
22.82
93/180
198/432

Exports/
Revenue
(%)
21.07
21.21
21.30
20.08
23.10
26.30
24.03
22.05
23.13
23.56
23.60
22.60
22.48
22.73
22.64
58/180
138/432

Figures are in inflation-adjusted 2016 dollars. Rank refers to 2016 data.

Revenue per
Employee
($000)
292.04
315.72
295.76
314.22
311.32
308.11
311.88
332.83
320.52
318.77
319.21
320.60
319.87
319.45
318.74
137/193
594/1370

Wages/Revenue
(%)
20.22
19.32
21.73
21.18
21.05
19.96
20.33
19.63
20.03
20.08
20.11
20.08
20.13
20.16
20.20
28/193
624/1370

Employees
per Est.
67.33
73.39
67.79
64.57
66.21
76.21
78.14
76.96
76.02
76.17
77.16
78.32
78.15
79.07
78.65
50/193
135/1370

Average Wage
($)
59,037.30
61,000.67
64,256.13
66,565.15
65,522.56
61,485.93
63,402.92
65,319.04
64,205.22
64,002.49
64,197.48
64,376.31
64,401.55
64,388.70
64,374.13
56/193
408/1370

Share of the
Economy
(%)
0.01
0.01
0.01
0.01
0.01
0.01
0.01
0.01
0.01
0.01
0.01
0.01
0.01
0.01
0.01
135/193
756/1370

SOURCE: WWW.IBISWORLD.COM

Boiler & Heat Exchanger Manufacturing in the USMarch 2016 35

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Jargon & Glossary

Industry Jargon

BAROMETRIC CONDENSERA contact condenser that


uses a long, vertical pipe where water and other liquids are
removed by the pressure at the end of the pipe.
BOILERA closed vessel in which water or other fluids are
heated.
ECONOMIZERA heat exchange device that heats fluid up
to its boiling point while improving boiler efficiency.

IBISWorld Glossary

BARRIERS TO ENTRYHigh barriers to entry mean that


new companies struggle to enter an industry, while low
barriers mean it is easy for new companies to enter an
industry.
CAPITAL INTENSITY Compares the amount of money
spent on capital (plant, machinery and equipment) with
that spent on labor. IBISWorld uses the ratio of
depreciation to wages as a proxy for capital intensity. High
capital intensity is more than $0.333 of capital to $1 of
labor; medium is $0.125 to $0.333 of capital to $1 of labor;
low is less than $0.125 of capital for every $1 of labor.
CONSTANT PRICESThe dollar figures in the Key Statistics
table, including forecasts, are adjusted for inflation using
the current year (i.e. year published) as the base year. This
removes the impact of changes in the purchasing power of
the dollar, leaving only the real growth or decline in
industry metrics. The inflation adjustments in IBISWorlds
reports are made using the US Bureau of Economic
Analysis implicit GDP price deflator.
DOMESTIC DEMANDSpending on industry goods and
services within the United States, regardless of their
country of origin. It is derived by adding imports to industry
revenue, and then subtracting exports.
EMPLOYMENTThe number of permanent, part-time,
temporary and seasonal employees, working proprietors,
partners, managers and executives within the industry.
ENTERPRISE A division that is separately managed and
keeps management accounts. Each enterprise consists of
one or more establishments that are under common
ownership or control.
ESTABLISHMENTThe smallest type of accounting unit
within an enterprise, an establishment is a single physical
location where business is conducted or where services or
industrial operations are performed. Multiple
establishments under common control make up an
enterprise.
EXPORTSTotal value of industry goods and services sold
by US companies to customers abroad.
IMPORTS Total value of industry goods and services
brought in from foreign countries to be sold in the United
States.
INDUSTRY CONCENTRATIONAn indicator of the
dominance of the top four players in an industry.
Concentration is considered high if the top players account
for more than 70% of industry revenue. Medium is 40% to
70% of industry revenue. Low is less than 40%.

HEAT EXCHANGEREquipment built for efficient heat


transfer from one medium to another. The media may be
separated to prevent mixing or they may be in direct
contact.
HVACHeating, ventilating and air-conditioning systems
used to maintain air quality through ventilation and
filtration.

INDUSTRY REVENUEThe total sales of industry goods


and services (exclusive of excise and sales tax); subsidies on
production; all other operating income from outside the
firm (such as commission income, repair and service
income, and rent, leasing and hiring income); and capital
work done by rental or lease. Receipts from interest
royalties, dividends and the sale of fixed tangible assets are
excluded.
INDUSTRY VALUE ADDED (IVA)The market value of
goods and services produced by the industry minus the
cost of goods and services used in production. IVA is also
described as the industrys contribution to GDP, or profit
plus wages and depreciation.
INTERNATIONAL TRADEThe level of international trade
is determined by ratios of exports to revenue and imports
to domestic demand. For exports/revenue: low is less than
5%, medium is 5% to 20%, and high is more than 20%.
Imports/domestic demand: low is less than 5%, medium is
5% to 35%, and high is more than 35%.
LIFE CYCLEAll industries go through periods of growth,
maturity and decline. IBISWorld determines an industrys
life cycle by considering its growth rate (measured by IVA)
compared with GDP; the growth rate of the number of
establishments; the amount of change the industrys
products are undergoing; the rate of technological change;
and the level of customer acceptance of industry products
and services.
NONEMPLOYING ESTABLISHMENT Businesses with no
paid employment or payroll, also known as nonemployers.
These are mostly set up by self-employed individuals.
PROFITIBISWorld uses earnings before interest and tax
(EBIT) as an indicator of a companys profitability. It is
calculated as revenue minus expenses, excluding interest
and tax.
VOLATILITYThe level of volatility is determined by
averaging the absolute change in revenue in each of the
past five years. Volatility levels: very high is more than
20%; high volatility is 10% to 20%; moderate volatility
is 3% to 10%; and low volatility is less than 3%.
WAGESThe gross total wages and salaries of all
employees in the industry. The cost of benefits is also
included in this figure.

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