A newly released international report indicates that 2006 revenues for the Industrial Process Furnace and Oven Manufacturing Industry in the U.S. were approximately $1.96 billion. The gross profit was 25.5% - just under $500 million. It was a very good year to be in this business.
With this many furnaces being manufactured, it’s no wonder people are concerned about efficiencies with the prices of oil and natural gas at historically high levels. For many of the same reasons mentioned in our October 2006 editorial, long-term fundamentals continue to suggest that natural gas prices will remain relatively high and gradually increase. It was a warmer than average winter overall with demand about 3% lower than an average heating season. It was the third coldest February on record, however, resulting in a 6% higher February demand. In most of the U.S., it was also the coldest April in the last 10 years.
Future uncertainty always creates anxiety in this market. Will the summer be warmer than normal, and/or will it be an active hurricane season? Either will result in higher natural gas prices.
With energy costs at historic highs, a new paradigm has emerged. Labor once was the highest component in manufacturing costs and energy was the lowest. This has turned completely around, and discerning purchasers of this equipment are aggressively seeking ways to keep the energy production-cost component as low as possible.
Another recently concluded study conducted by Clear Seas Research for Industrial Heating sheds some additional light on the subject. Fully 96% of the burner-survey respondents indicate that natural gas is used to heat some or all of their process furnaces. Most furnaces (59%) were used for heat treatment.
When it comes to investing in furnace systems, 48% of survey respondents listed “energy savings” as a key factor while 41% chose fuel savings. Related to fuel savings, 13% of respondents gave “emissions reductions” as a key reason to invest in the next two years.
Perhaps not surprisingly, 64% of respondents to the burner survey listed “efficiency” as the most important characteristic they look at when purchasing a new burner. It’s no wonder that industry groups such as the Gas Technology Institute (GTI) utilize their resources to research ways to increase combustion efficiency in a variety of applications. GTI employs a staff of over 250 – 15% of whom hold Ph.D.s – many of whom are dedicated to improving process efficiencies.
Besides the obvious monthly cost savings associated with improving the efficiency of their process burners, many gas companies are offering rebates and incentives to customers who improve or replace qualifying lower-efficiency equipment. One example of this is The Gas Company in Southern California. More than $10 million in energy-efficiency rebates and incentives is available to its business customers in 2007. This money is divided between several different programs – more than one of which could apply to industrial customers making energy-efficiency improvements. Check with your natural gas company to see if you can take advantage of any similar incentives. IH