First quarter of 2020 in the HVAC and plumbing industry in Poland

The market situation in the HVAC and plumbing industry in the first quarter of 2020 continued to have a positive nature despite the fact that from the beginning of March, the growing nervousness in economy and society caused by the coronavirus pandemic could be observed. Opinions on the results of the industry were mostly positive; however, they varied depending on the product group, region or the target customer group. There were also opinions claiming that if the situation from the beginning of the year was to be continued till the end of the year, it would be a record year. While averaging all the results that could be collected from the market at the end of the quarter, the HVAC and plumbing industry ended the quarter with a positive result close to 10% increase. However, there was certain slowdown in sales growth, in some cases there were even declines, but such a phenomenon can be regarded as normal. The expected results in the following quarters are unknown. It should be kept in mind that economy is composed of interconnected elements that depend on related and further industries, which translates into a number of factors important for their functioning, such as the supply chain and, what is particularly important - the purchasing power of final customers of goods and services. Meanwhile, since the onset of the pandemic in Europe and the US, societies have been bombarded by politicians and their related experts of all sorts with only a negative message inflecting the word “crisis” or economic slump in all possible cases. Such a message conveyed by all the media gives rise to a virus that is not less dangerous – the pandemic of fear, which paralyses the motivation to engage in any business activity. And the situation that we are dealing with constitutes simply new boundary conditions that we need to adapt to by applying safety procedures that eliminate or reduce to maximum the risk of infection in order to maintain the circulation of money in the economy. Unfortunately, this is what is missing in the activities of governments – motivating people to action by showing them how to do it safely to go through the difficult period without erasing the sources of their income.

The HVAC and plumbing industry in Poland was one of the first to respond to the new situation and as early as at the onset of first signs of panic in the society caused by the message about COVID 19 threat, it prepared the procedures for safe functioning for servicemen, manufacturers, distributors and plumbers, which helped to relatively quickly control the situation and, undoubtedly, had a positive impact on the positive result of the industry after the first quarter of 2020. Nevertheless, in March, first negative signs of the slowdown caused by the introduction of restrictions into the operations of the economy and the fear of the society of the infection and financial insecurity could be seen.

Growth in sales was observed again in the basic groups of products, where increases have been observed already for several quarters; although, in majority of cases, this growth was not as spectacular as in the recent past. Other product groups were stabilised, or there were slight decreases, except for a few exceptions, which concerns mainly the group of solid fuel boilers and again solar collectors. This demonstrates that a certain stable ceiling of the sale of heating devices is being reached. According to the collected opinions from the market, if it hadn't been for the affecting employment problems in the first half of the quarter – mainly due to absence of professionals in workmanship, the achieved result could be a bit better. In general, the market is growing due to the increased demand for residential premises and possible investment expenditure of entrepreneurs in the construction business and increased activity in industrial plants. In addition, this winter was exceptionally mild, which did not cause the slowdown of construction works usual in this period.

General economic situation in Poland

In Q1 2020, the positive trend was still continued as regards the general economic results in the country, although, in March some concerns appeared related to the new situation associated with the corona virus pandemic. According to the data provided by the Central Statistical Office regarding industrial production in the period January-March 2020, the sales in industry was higher by 1% compared to the corresponding period of 2019, when the increase was 6.1%. In March this year, the sales in industry were lower by 2.3% compared to March last year when the increase by 5.6% was recorded, and in comparison to February this year, it increased by 2.4%. After eliminating the impact of seasonal factors, only in March 2020, the sales in industry were at the level lower by 4.8% than in March 2019 and lower by 7.2% compared to February 2020. Such data may, of course, worry, but if we look at the result from the perspective of, e.g. 2015, the achieved dynamics of the sales in industry is still higher by 24.6%, and at that time the economy also operated quite well. It is however a fact that the downward trend of the sales in industry in Poland has been maintained consistently below the levels from the previous year, since June 2019, which, however, is not related to the impact of the corona virus on economy. According to the data provided by the Central Statistical Office, the dynamics of the sales in industry according to fixed prices in Poland after the first quarter of 2020 was as follows:

 

SPECIFICATION	III 2020			I-III 2020
	II 2020=100	III 2019=100	monthly average 2015=100	I-III 2019=100
INDUSTRY	2.4%	-2.3%	+24.6%	+1%
Mining and quarrying	12.1%	-4.8%	-10.6%	-7.7%
Industrial processing	2.5%	-3.0%	+26.1%	+1.2%
Production and supply of electricity, gas, steam and hot waterD +	-2.7%	+4.7%	+24.5%	0.2%

(Source: CSO)

In case of the construction industry, in the period January-March 2020, the construction and installation production increased by 5.8% compared to the same period in 2019, when the recorded increase reached the level of 9.4%, which confirms the continuation of the decrease in the growth dynamics in the construction industry and slow moving into the period of secure stabilisation, which could be observed from the beginning of the last year. The dynamics of the construction and installation industry (in fixed prices) in Q1 2020 compared to the corresponding period of the previous year was as follows:

 

SPECIFICATION	III 2020		I-III 2020
	II 2020=100	III 2019=100	I-III 2019=100
CONSTRUCTION INDUSTRY	+25.0%	+3.7%	+ 5.8%
Construction of buildings	+16.3%	+2.9%	+2.3%
Construction of civil engineering structures	+39.7%	-0.4%	+7.0%
specialised construction works, including HVAC and plumbing works	+19.8%	+10.8%	+9.0%

 (Source: CSO)

In the period January-March 2020, the largest increase by 9.0% of the value of the construction and installation production occurred in the units where the basic type of operations was the performance of the specialist works, including HVAC and plumbing works. Increases were also observed by the enterprises engaged in the construction of buildings by 2.3% and enterprises where the basic type of operations was the construction of civil engineering structures - by 7.0%. In the period January-March 2020, the increase in the value of investment works compared to the corresponding period of 2019 amounted to 4.2% compared to the increase in this group by 9.1% in the corresponding period of 2019, and of renovation works to 8.9% compared to the increase by 10.0% in 2019.

The dynamics of the construction and installation production in March this year (in constant prices) compared to the average monthly value from 2015 amounted to 104.3.

 After eliminating the impact of seasonal factors, the construction and installation production was at a level higher by 1.6% compared to the corresponding month of the last year and by 3.6% lower compared to February 2020.

According to the preliminary data, in March 2020, the prices of the construction and installation production compared to March 2019 increased by 3.0%, and compared to February 2020 by 0.2%.

Compared to March 2019, the prices of the construction of buildings increased by 3.6%, of the construction of civil engineering structures increased by 2.8% and the specialist construction works, including HVAC and plumbing works, increased by 2.5%.

In the entire Q1 2020, the prices of the construction and installation production increased by 3%, including the prices of specialised and construction works covering the HVAC and plumbing industry, increased by 2.6%, and the prices for erecting buildings increased by 3.6% compared to Q1 2019.

In Q1 2020, the financial situation in the construction industry did not differ visibly compared to previous quarters in 2019. A slight decrease in the number of bankruptcies of companies operating in the construction industry compared to 2019 could be noticed. Nevertheless, in connection with the disturbances in the work of courts in March 2020, caused by restrictions due to the corona virus, so far, there are no reliable data on what was the end of Q1 in terms of the bankruptcies. The trend of weakening payment morality and delays in the settlement of the issued invoices is continued. It can be assumed that at the end of March 2020, this process intensified. There may be several reasons for such a situation, which are side effects of the ubiquitous media information announcing deep economic slump, which begins to work as a self-fulfilling prophecy. Entrepreneurs can create financial reserves at the expense of their suppliers of goods or services. End customers also begin to suspend payments for fear of possible (according to the received message) loss of jobs, which already starts to occur and to create a financial reserve for the so-called “rainy day”. The justification in the form of the corona virus is simple, although, most frequently, so far, it does not reflect the reality. On the other hand, the economic slowdown is increasingly apparent, which begins to have an impact on the financial liquidity of companies. In the second part of March, some manufacturers also started to experience the weakening of demand for their products, which was also a direct effect of the negative information provided to the society, which results in the resignation from the previously planned works, caused by insecurity regarding the financial future.

According to the data published by COFACE, compared to other industries, the construction industry still looks good, as in 2019 it recorded a decline in the number of bankruptcies by 14%, while a year before they increased by 4%. Such a result indicates further moderate improvement of the condition of the construction sector at the beginning of 2020, however without taking into account the negative impacts of restrictions caused by the corona virus.

Development of the housebuilding industry and trends in the HVAC and plumbing industry

The situation in the housebuilding industry, based on the increase in the number of started construction works and issued building permits and the number of finished apartments, also has a positive impact on the situation in the HVAC and plumbing industry, despite the domination of the exchange market today. The data showing trends in the housebuilding industry, despite the already significant weakening of the growth dynamics, continue to be positive, which should also be a good forecast for the HVAC and plumbing industry at least for the next 2 years, providing that there are not too large negative side effects for the economy of the epidemics of fear against the virus. In the first quarter of 2020, the number of premises provided for use, the number of started construction works and the number of building permits granted and notices of new construction sites continued to be larger than a year before. According to the data published by the Central Statistical Office, in the period from January to March 2020, 49 523 apartments were provided for use, which accounts for the increase by 4.4% compared to the corresponding period of 2019. The trend of shares in the implemented projects in terms of investors also continued. In the first quarter of 2020, developers still held a dominant position. They built over 30.4 thousand units, which accounts for 61.4% of all apartments provided for use in the period I-III 2020 and an increase by 5.8% compared to Q1 2019, and individual investors built approx. 18.2 thousand apartments, which means an increase by 5.5% compared to Q1 2019, and the achieved share increased slightly and it amounted to slightly more than 36.8% in the this category of statistics. A smaller number of apartments in Q1 2020 was provided for use in the cooperative construction business (404 vs. 667, which means a decrease by approx. 39.4%). In other forms of the construction business (municipal, social rental housing and company construction business), the total of 483 apartments were provided for use, vs. 731 apartments in the previous year, i.e. by about 36.9% fewer than in the corresponding period of 2019. The structure of the apartments provided for use affects the structure of the installed heat sources. Developers who build mainly in urban areas frequently use the possibility of connecting the erected buildings to the municipal heat distribution network, which reduces the costs of the performed installation by heat sources replaced by a heat transfer station.

In the first quarter of 2020, the construction of 52 543 apartments was commenced, which constitutes a drop by approx. 2.5% compared to 2018. In terms of the division of investors, developers commenced the construction of 31 847 apartments, which accounts for the share of 60.6% of the total number of apartments whose construction had been started, and individual investors commenced the construction of 19 625 apartments, which accounted for the share of about 37.4% in the total number of commenced building works, which means similar results of the market share to 2019. In the development construction business, there was a drop in the commenced projects by about 4.6%, and in the individual construction business an increase by 2.6% was recorded compared to Q1 2019. In the first quarter of 2020, compared to Q1 2019, there was a decrease in the number of apartments whose construction was commenced in the co-operative building industry, where the construction of 528 apartments vs. 675 a year earlier was commenced, which means a decrease by approx. 21.8%. The building industry of social rental and communal apartments also experienced a drop that amounted to 22.2% (543 apartments in I-III of 2020 vs. 698 apartments a year before).

According to the data from the Central Statistical Office, building permit designs were granted or notices with a building design were made for 59 092 apartments, i.e. by 3.3% more than in the corresponding period of 2019. The largest group of investors in this category was formed by developers who were granted building permits for 36 815 apartments and individual investors who were granted building permits for 21 948 apartments. In total, these two forms of housing were granted building permits or submitted notices of the construction site with a building permit for 99.4% of total dwellings (where developers account for 62.3% and individual investors for 37.1%). In Q1 2020, in the co-operative building industry, the number of apartments with building permits or notices with the building permits was smaller by 55.9% (204 compared to 463 apartments in Q1 2019) than in 2018 and smaller by as much as approx. 84% (125 compared to 780 apartments in Q1 2019) in the social and communal rental building business.

Situation in the HVAC and plumbing industry in Q1 2020

In the first quarter of 2020, the situation in the HVAC and plumbing industry was the continuation from 2019, despite certain turmoil in March resulting from the panic caused by the corona virus. The results achieved in general in the HVAC and plumbing industry, as in previous quarters, are mostly positive. The general dynamics of sales growth in Q1 2020 was further reduced, obviously at different levels in different product groups. There were also opinions that the development of sales from the beginning of the first quarter indicated that 2020 may be a sensational year; however, no one took into account the negative impact of the corona virus on the economy. On the other hand, in some product groups, there was even a regression, which indicates that the market has started to reach stability and it has established at a new level of its potential, but e.g. in the group of heat pumps, continued dynamic increases took place, however at different levels in individual groups of heat pumps. In the first quarter of 2020, a greater variety in the achieved performance could be observed depending on the regions of Poland, as well as depending on the group of final customers. The first quarter of the year, it is a traditional period of price increases introduced by manufacturers for the entire industry and creation of warehouse purchases for equipment at former prices, which also translated into the results achieved in the first quarter. The exceptionally warm winter contributed to the fact that at the end of the year there were no downtimes caused by low temperatures and snow, and plumbing and HVAC works could proceed without interference. Just as in previous quarters, the backbone of the development of the heating equipment market continued to be the replacements of old equipment with new one as part of fights with low emission at the local level. The market expects further improvements in the operation of the Clean Air Program system of the National Fund for Environmental Protection and Water Management (NFOŚiGW), which is supposed to take place in May and whose effectiveness was still far from the expectations of beneficiaries, although signals from the market indicate the growing importance of the support for the replacement of heating equipment under this program. The basis for the anti-smog activities continued to be EU programs managed by local governments. A negative side effect of grant programs is the fact that private investors have become very sensitive to grant programs – they frequently stop their investments in anticipation of a new program of grants. This is particularly evident in the case of solar collectors and biomass boilers, but also more and more frequently in case of heat pumps, which so far have developed in a stable and consistent manner, without spectacular support programs, as was the case in the first product groups mentioned above, which is currently an asset in case of this product group. Contradictory information was provided from the market of larger devices. There have been opinions regarding increased interest in the devices with higher capacity, which would indicate the implementation of investments in the industry. This trend was stopped in mid-March in devices above 45 kW, and even small decreases could be observed, which could prove slow deceleration of investments of medium and larger companies (the predicted economic slowdown and signals from Europe). The companies are starting to economise. Yet, so far, the first quarter has not been affected by the corona virus syndrome. If this happens, it troubles may be expected in particular for medium and large powers. Hotels, guest-houses and companies will not be built or modernised for fear of financial problems and the vague possibility of earnings due to maintained restrictions in economic operations.

The emergence of the corona virus in early March in Poland caused a series of perturbations both in the society and in the economy. At the beginning of the epidemics in Poland, the signs of psychosis could be seen caused by the threat. In the HVAC and plumbing industry, at the beginning, fitters announced that they suspend their activity, which, unfortunately, had negative effect in the cancellation of the previously scheduled works by customers. The negative message of the representatives of governments of both EU and non-EU countries, related so-called experts and, above all, the media, which has been aimed at increasing social concerns and it has not been targeted at positive actions designed to adapt the economy to new boundary conditions formed by the pandemic, has not been favourable. On one hand, we have a real threat to the health of citizens, and, on the other hand, we have a threat to their economic existence, which is no less dangerous phenomenon. While in case of health hazard, we rely on doctors and laboratories, refocusing of business activity by adapting it to new conditions depends on us and on those in power. According to the preliminary analyses from the onset of the pandemic in Poland, 20% of the SMEs operating in our industry planned to suspend their businesses and another 60% introduced significant limitations, including the limitations of specialists' visits at customers' houses for repair purposes (e.g. service technicians were also not allowed to enter houses and at the same time, they were also concerned when they had several visits per day).

For this reason, SPIUG (Association of Producers and Importers of Heating Equipment) initiated a number of measures that were necessary to overcome the concern that occurred in the industry due to the epidemics and helped the companies to adapt quickly to the new conditions of economic activities. After three weeks, it can be safely stated that the vast majority of companies operating in the HVAC and plumbing industry have introduced safety procedures preventing COVID-19 infection and they continue their operations.

For this purpose, safety procedures for servicing technicians, fitters and their customers have been prepared, as well as for manufacturing companies and trading companies, which have been passed on to the companies operating in the industry. As an industry, we have taken and implemented specific measures from the onset of the pandemic in Poland to guarantee free access to the facilities that require servicing for technical experts hired in this sector (mostly engineers, servicing technicians, fitters), while observing the necessary safety procedures also in case when the European Union and its member states, including Poland, introduce more stringent safety measures against the spread of the virus, limiting the possibility of movement for its citizens. This ensured the maintenance and repair of the really important HVAC and plumbing equipment, and at the same time, this will ensure the continuity of the supplies of the domestic hot, cooling and sanitary water and the operation of the ventilation as elements of the critical infrastructure. The industry requested the Ministry of Development to introduce a temporary change of principles related to the repair of equipment and elements of HVAC systems as soon as possible, so that the extended repair time does not result in the obligation to replace the equipment with the new one until the situation in Poland and worldwide is restored to normal. The reason for such request is the fact that the guarantor and the seller have now increasingly reduced possibilities to meet their obligations (handling complaints, repair under warranty) due to the lack of available employees and the growing problems with the supplies of spare parts and sub-assemblies from import or manufactured in Poland based on imported raw materials. This gives rise to serious financial consequences (e.g. instead of a repair, it will be required to release a new product to the consumers, contrary to the principles of the closed loop economy and climate neutrality). A request to include the technical equipment of a building and services in the form of repairs of the heating and hot domestic water systems and ventilation and air-conditioning systems as critical infrastructure during the preparation of contingency plans was also addressed to the Ministry of Development. In the emergency situation, which is the occurrence of SARS-CoV-2 virus pandemic, it is necessary to supply buildings with heating and hot water, to ensure uninterrupted operation of HVAC and other systems ensuring safe use of facilities by the person located there. The heating of rooms, and above all, the availability of hot water, are prerequisites for maintaining health and comprehensive hygiene according to the recommendations of WHO and the Ministry of Health. One of the main recommendations in the fight against the virus concerns regular and thorough hand washing with hot water and soap.

As the HVAC and plumbing industry, we have also joined the stream of actions intended to reactivate operations in the economy, enabling the economic operation of the country in times of pandemic. It should be noted that economy is a system of connected vessels, each of which has direct or indirect impact on other industries. The currently ongoing pandemic of corona virus has a serious impact on the Polish and European economy. The preventive measures intended to reduce the risk of virus infection restrict business activity by making people to stay at homes, by the return to their home countries of the foreigners working in Poland in many sectors of the economy and by the limitation of the movement of persons at the boarders. In many cases, the effect of such measures is the necessity to wind up a business in the service sector, reduction of production resulting from the decreased number of employees, broken supply chains and significant weakening of the flow of capital in the consumption area. Therefore, it is necessary for the government, to address a clear message to business on how to deal with the emergency situation that the corona virus pandemic is and how to maintain, where possible, production, trading and service activities while observing the safety procedures necessary in the present situation. This type of a message would be a motivation for those entrepreneurs for whom shifting the operations to new tracks is possible and will release financial support measures for those companies that for various reasons and due to the nature of their operations have very limited current field of operation or their operations have become impossible. At the same time, when today's priority is to effectively deal with the health crisis and to preserve the business operations in Poland at the level that will help us to quickly return to the path of normal functioning of the economy soon after the epidemiological threat ceases, we must plan tomorrow's economic recovery right now. One of the pillars on which the business operations can be rebuilt is the widely understood construction sector based on energy efficiency and the use of RES in supplying buildings with electricity.

Another important thing is the preparation of procedures for the functioning of the economy in emergency cases in the future. Numerous experts, both in Poland and abroad, point to the fact that, unfortunately, this is not the last pandemic and in the future, we may expect other similar problems. Thus, this is our task to draw conclusions from the current situation. Right now, we should be preparing procedures for the future that, in case of epidemics, will help us to quickly and smoothly shift the economy to the emergency operation mode to avoid economic problems or to reduce the negative impact of the epidemics to the maximum extent on the functioning of industry and services, while maintaining the maximum health and economic safety of the society.

After the emergence of the epidemics, since March, great caution in the operations of companies and customers have been observed. The implementation of grant programs is hampered due to the reduction of the operation of offices (verification of applications). Modernisation investments were frequently completely stopped in the second part of March (fear for financing, access to facilities). The situation in the development sector, where investments are moving at its standard pace, appears to be relatively best. Investments in end-customers in single-family housing are carried out in a rather standard manner. The slowdown in operations or even freeze concerns in particular future investments and projects. Investors and contractors are concerned about the future, about payments/financing.

A separate subject in the first quarter of 2020 was the issue of labour. Order books of fitters are full and their services are increasingly expensive. It is estimated that the turnover generated in the HVAC and plumbing market could be even better if it hadn't been for the bottleneck in the form of the capacity (and willingness) of fitters. An interesting phenomenon can be observed in the labour market. It is certain that problems in the labour market related to such restrictions as, for instance closing borders for the traffic of individuals and departures of Ukrainian workers to their home countries did not bode well for domestic companies and manufacturers. Ukrainian workers are leaving but many Poles have returned from England and they admit that their situation there is not so good due to the improved pay conditions in Poland. Such better pay conditions and lack of necessity to separate from families and friends increases the attractiveness of the domestic offer, both for employees and employers, as undoubtedly the level of education and knowledge of modern technologies in this occupational group is significantly higher than the one represented by Ukrainian workers.

Having a substantial order book by manufacturers in the industry is a good omen for the rest of the year, and the success of other quarters depends on the time when come back to normal operations and on whether supply chains are not stopped, e.g. from Italy, where trade unions refused to send back production workers despite the fact that safety procedures in production are the simplest to introduce.

To sum up: in the first quarter of 2020, despite significant decrease in the growth dynamics, good economic situation continued to be maintained in the construction industry and, consequently, in the HVAC and plumbing industry. The financial situation of companies, especially HVAC and plumbing companies is relatively good, although there are concerns regarding liquidity congestions caused by the effects of restrictions in business operations as a tool to fight with the corona virus. Undoubtedly, one of the effects of the new situation is the increase in the importance of the Internet since March, as a tool for the distribution of heating equipment. As a result of the undertaken information actions to reduce low emission, the interest in modern heating technologies, including RES, has increased, in particular heat pumps, where a broad promotional campaign is visible for the use of this technology at every level, as well as solar collectors; however, the latter are more visible in commune tendering procedures, held as a result of good practices resulting from the application of such systems in the very commune or in the neighbour, in particular in eastern Poland. Unfortunately, the structure of the sales market, based nearly exclusively on the sale of systems tailored for specific projects, translated into further declines in the sales due to a smaller number of implemented commune orders. In general, it can be stated that the HVAC and plumbing market in 2019 continues an upward trend, although the increase has a significantly smaller dynamics than a year ago. The growth in the industry in Q1 2020 can be assumed at the level of 8-10%.

In the summary it is also worth noting that the new VAT Act – the situation with the so-called split-payments, is strongly confusing for smaller HVAC and plumbing companies – they lack knowledge of the proper issuance and payment of invoices.

Situation in selected product groups

As in 2019, Q1 2020, with some exceptions, proceeded in a positive manner as regards sales virtually in the majority of product groups of heating equipment and HVAC and plumbing elements. It could be observed that the growing trend in majority of product groups was continued while others stabilised or decreased. Increases concerned mainly modern heating equipment meeting the eco-project and low-emission conditions. In case of wall-mounted gas boilers, the increase in Q1 2020 was again at a high level, namely approx. 21%. Such high growth can be explained by much milder winter than a year before, and above all, by the actions of stock replenishment by distributors before traditional spring price increases. Thus, the result of the sale of boilers in the first quarter of 2020 from distributors to fitters can be lower that it is provided by manufacturers. Before making a decision, customers compare components, technical parameters and functions available in the device. A slight increase of 3% in the sales of flow-through gas water heaters and a large increase for free-standing boilers are also interesting. In addition, consistent growing interest in heat pumps, mainly air-source heat pumps, was noticeable, where according to first estimates the increases significantly exceed 50%. Further increase in interest in photovoltaic is visible as a technology for obtaining solar energy for prosumer purposes, including the supply of heating equipment with electricity in hybrid systems, but also for strictly heating purposes. This type of approach goes hand in hand with the trend of electrification of heating in the future. The interest in the general use of RES for heating purposes is becoming increasingly high. A significant drop of about 50% in solar collectors can be seen, but the reference point here is the record Q1 2019 when the increase was close to 200%.

Product group	Trend Q4 2019/Q4 2018
Wall-mounted gas boilers, in total	+21%
Wall-mounted gas condensing boilers	+26%
Wall-mounted conventional gas boilers	-25%
Free-standing gas boilers, in total	+33%
Free-standing gas condensing boilers	+39%
Free-standing conventional gas boilers	-38%
Gas flow-through heaters for DHW	+3%
Free-standing oil boilers, in total	-38%
Free-standing oil condensing boilers	-24%
Free-standing conventional oil boilers -	-66%
Solid fuel boilers	no data
solar collectors	-55%
heat pumps	+70%
storage tanks and buffers	-7%

solar collectors heat pumps storage tanks and buffers

Conventional gas boilers

After significant declines in the last two years and the large decrease at the end of 2019, in the first quarter of 2020, the decline amounted to approx. 25% compared to the first quarter of 2019. In the group of free-standing conventional gas boilers the decline of 25% was also recorded, however, in relation to the basic value, the sale of even a few pieces less or more produces a change effect calculated in percentage. Where due to technical reasons condense boilers cannot be simply installed, new conventional boilers with better parameters are installed to replace the used ones. More and more manufacturers withdraw these devices from their offers. Conventional dual-purpose boilers that meet the ecoproject requirements have reappeared on sale, but the market is rather searching for traditional solutions and this is why, where it is possible to install a condensing boiler, such a boiler is selected instead of the conventional boiler that meets the requirements and sometimes is more expensive. This segment of the market should be treated rather as niche market that is being consistently phased out. Gas condensing boilers: Still, also in the first quarter of 2020, the trend of significant increase in sales is maintained. Also in this product group, it is possible to observe a trend to seek a boiler with the lowest price, but more and more frequently end customers ask about issues related to further operation, service availability and automation and, consequently, more and more frequently, they are ready to pay more at the investment stage to have peace of mind later on, during the boiler operation. The market of wall-mounted gas boilers is virtually dominated by condensing devices. Sales increases in the group of wall-mounted condensing boilers in Q1 2020 was one more time higher compared to the previous quarter but also compared to Q1 2020 and it amounted to 26% year-to-year, which is a perfect result if the reference base is calculated in tens of thousand devices. In the group of free-standing gas condensing devices, one more time quite significant increases were also observed, which in Q1 2020 reached the level of approx. 39% for free-standing boilers in general, but in case of boilers with smaller power without a storage tank, this increase amounted to more than 60%, which in case of a relatively low starting basis is not particularly difficult to be achieved. In case of boilers with an integrated storage tank, the increase reached the level of 37%. There was certain recovery visible in the first quarter in case of boilers with greater capacity, i.e. above 50 kW. In this case, the increase amounted to nearly 10%. Free-standing boilers are more popular but due to the dimensions, the market potential for this group of heating devices is smaller and therefore the group of customers is most frequently narrowed to institutional customers. In Q1 2020, a drastic decrease of approx. 85% in the sales of boilers with the so-called condensing heat exchanger was observed, which indicates that the phenomenon of the existence of such boilers can be treated as transitional and these devices are not developed in the majority of boiler manufacturers.

Oil boilers:

In Q1 2020, in the group of oil boilers, there was further decrease in sales by about 38%. And the drop in sales for conventional boilers amounted to 56% and for condensing boilers the drop amounted to 24%. In Poland, decreasing interest in this type of heating is visible on a quarterly basis. It is a strange situation in the market of oil boilers, where fuel oil is now as cheap as never before, the cost of heating is comparable to gas heating. The users of such boilers refuelled oil and are waiting, postponing modernisation of gas boilers, because they have fuel oil and are observing what will happen next. This situation does not encourage to the replacement of boilers or to the installation of heat pumps or other RES, although it may be assumed that existing users of oil boilers, which have never been cheap devices, more and more frequently choose heat pumps in case of modernisation as an alternative to oil heating.

Solid fuel boilers:

 In Q1 2020, traditionally, reduction in the interest in the purchase of solid fuel boilers was visible. Further decline in interest in coal boilers was observed. In case of biomass boilers, the first quarter promised very well, with two-digit increases. Nevertheless, in mid-March, as a result of the first symptoms of the corona virus panic, the sales of solid fuel boilers, including biomass boilers, was virtually stopped. The sudden collapse meant that some manufacturers had to stop their production.

Since the beginning of 2020, further increase in interest in automatic biomass boilers was recorded - at the level up to 20%. Despite the effective regulations and declarations on the elimination from the market of the so-called junk boilers, these types of boilers can still be purchased without any problems through on-line sales platforms. It can be assumed that the share of biomass boilers at the beginning of 2020 exceeded 65% in the total volume of all solid fuel boilers. The recession and decreasing interest in solid fuel boilers as a whole is the result of both area limitation of the possibilities for their mounting and the increase in the average device price caused by the necessity to adapt them to the currently applicable regulations. The consistently growing interest in biomass boilers is visible, including in particular pellet boilers, but also an increasing interest in boilers gasifying pieces of wood can be observed in the era of increasing restrictions regarding coal firing. Hence, the significant drop in interest in eco-pea coal boilers is visible. The impact of abstaining from making a decision regarding the modernisation of boiler rooms because of waiting for new co-financing principles under “Clean Air” program and waiting for a decision on securing a grant under support programs could also be observed. Such a market assessment may appear to be significantly undervalued due to the sales of the unclassified boilers in the so-called grey zone, which is not included by any statistics or market monitoring. At the same time, a reliable market potential monitoring system is still missing for this group of devices based on the model of the well-functioning panel covering other heating devices. An interesting detail may be the fact that more and more existing manufacturers of solid fuel boilers are extending their offers with heat pumps, including the production of those devices in their plants.

Heat pumps and electric heating:

As in previous quarters, in Q1 2020, we could observe further increase in the interest in modern advanced heating devices powered by electricity, such as heat pumps and modern flow-through heating boilers. This also applies to electric heaters for domestic hot water, both flow-through and capacity. In Q1 2020, heat pumps reported significant increases in sales, which can be estimated at approx. 75%, which is a sensational result. Traditionally, the highest increases were reported in air-source heat pumps, where increases per quarter doubled and in some groups even tripled for some items. One more time, in the 1st quarter of 2020, the interest in pumps for domestic hot water decreased, where in the 3rd quarter 2019 the increases were still at the level of nearly 30% compared to the previous quarter, while in the 1st quarter 2020 about 20% decrease was recorded.

In Q1 2020, ground-source heat pumps recorded a noticeable increase of over 50% in the group of reversible heat pumps, but a decrease of approx. 15% in the group of non-reversible pumps for heating, which in total as ground-source pumps, is a good result if we take into account the costs of making such a system. Certainly, within individual heat pump groups there was a big discrepancy in the sales results depending on the pump type - there were both spectacular increases and significant declines. The stable upward trend in the heat pump group is the result of the consistent information and promotional policy pursued both in Poland and in other EU countries. There is also growing interest in heat pumps as devices working in hybrid systems with gas heating boilers, where the increase in the number of such systems has more than tripled, but also in relation to the relatively low reference framework, or in solar collectors and PV as a power source that is used more and more frequently in systems with heat pumps. In case of electric boilers, there is further increase in interest in this technology due to the ease of mounting and costs of the system. The sales dynamics in the 1st quarter of 2020 was again quite high and it reached the level of approx. 20%, with a further upward trend compared to the 1st quarter of 2019. Generally, for electric heating devices, the following trends can be distinguished after Q1 2020: - flow-through electric heaters – continuation of the sales level from the 4th quarter of 2019 - capacity electric heaters – continuation of the sales level from the 4th quarter of 2019 - electric heating boilers – continuation of the dynamic growing trend, increase in sales by 20%. In general, it can be assumed that in case of heating devices and devices for the preparation of domestic hot water powered with electricity, the market increase in the 1st quarter of 2020 reached the level of 6%.

 Solar collectors:

In the first quarter of 2020, in the group of solar collectors, there was a further quite significant drop in sales of these types of system, which amounted to approx. 55%; nevertheless, the sales in absolute numbers continued to be very high, as generally, these systems are sold in the first quarter of the year. It should be also noted that the sales of collectors in the 1st quarter of 2019 was very high above average, which slightly distorts the percentage result. Such a result is the outcome of the saturation of the market of tendering projects for such systems. In vast majority flat collectors were sold, and in the group of vacuum collectors, in the 4th quarter there was a decrease at the level of about 90%. Such a result is a consequence of the market structure in this product group, based on the implementation of projects based on commune tendering procedures and support programs. Despite such declines, there were positive signals from the market regarding the increase in the sales of collectors by the retail trade. Still, unlike in case of heat pump technology, there is absolute absence of promotional and informational activities supporting this technology as completely emission-free, with negligible operating costs. For a long time, there has been no education regarding the opportunities offered by the installation of collectors. PV systems become a kind of competition – they are installed to power electric heating devices and are frequently confused with solar collectors.

Gas flow-through heaters for domestic hot water:

After declines in the 4th quarter of 2019, the market of gas flow-through heaters for domestic hot water recorded an increase by 3% in the 1st quarter of 2020, which proves certain stabilisation of the market. It can be assumed that this technology for the production of domestic hot water is more and more frequently replaced by other sources of DHW generation. These types of devices are no longer installed in new buildings. There is only the replacement market.

Heaters and other system elements

 The first quarter of 2020 in the group of heaters was slightly better than previous quarters. Until mid-March, the sales of steel heaters in pieces was at the level of 2019, with a slight upward trend, even up to about 10%. Also in this product group, in March, there was a price increase, which translated into larger purchases made by wholesalers. In case of aluminium heaters, the market signalled drops by several dozen percent, even by 60%. Consistently, for many quarters, there has been a noticeable increase in surface heating at the two-digit level. It can be seen that the trend of the growing share market of the application of surface heating has been solidifying, where increases in the first quarter exceeded from 10% to even 60%, depending on the type. The sales of various heating system components, such as tubes, pipe couplings, dividers, etc. exceeded 20% in many cases. In the group of storage tanks and buffers there was stability at the level of a slight decrease of about 7%. And in the 1st quarter of 2020, a decrease of about 60% was recorded in the sales of double-coil storage tanks, which reflects the reduced demand for systems powered from solar collectors and in hybrid systems in the 1st quarter of 2020, but the sale of single-coiled storage tanks increased by 30%, which corresponds to the demand for storage tanks to cooperate with gas boilers.

Warsaw, 27.04.2020

Prepared by SPIUG