Mechanical Insulation Market Exceeds $13 Billion in 2008

Ronald L. King

Ron King is a Past President of NIA, the World Insulation and Acoustic Congress, and the Southwest Insulation Contractors Association. He was awarded the NIA’s President’s Award in 1986 and again in 2001. He is a 50-year veteran of the commercial and industrial insulation industry, during which time he held executive management positions at an accessory manufacturer and specialty insulation contractor. In 2004, he retired as the Chairman, CEO, and President of a large national insulation distributor/fabricator. He currently serves as a consultant to NIA on a variety of educational, outreach, and governmental initiatives, including coordinating many association alliance-partnership activities, serving as Chairman and Past Chairman, respectively, of the National Institute of Building Sciences’ National Mechanical Insulation Committee and Consultative Council, and as NIA’s liaison to the Federation of European Insulation Societies (FESI), which represents the European mechanical insulation market. He can be reached at RonKingRLK@aol.com.

August 1, 2009

The National Insulation Association’s (NIA’s) 2008 Industry Measurement Survey results indicate that the industry in 2007 experienced a 39.1 percent growth over 2006, while in 2008 it grew 5.9 percent over 2007, putting the mechanical insulation market at $13.6 billion with a compounded growth of 47.3 percent over 2006.

The NIA Industry Measurement Survey began in 1997, with an estimated market size of $6.2 billion. The market has more than doubled in 12 years.
The overall survey methodology has been consistent from year to year. The ratio of labor to material and the percent of material flowing through the distribution channel have been adjusted from year to year to reflect current trends, but the overall methodology of calculating the results has not changed.

The survey does not include data related to metal building insulation (MBI); heating, ventilating, and air-conditioning (HVAC) duct liner; original equipment manufacturer (OEM) products; building insulation; refractory products; other specialty insulations; or insulation products or technologies not currently in the NIA World of mechanical insulation products. The value added by fabricators and laminators has not been accounted for, nor has the potential impact of imported products. The consistency of participation by larger manufacturers, combined with the consistency of tabulating the results, provide some comfort when examining the overall market size and growth rates. However, based on the items not accounted for in the summary, the annual totals can only be considered conservative.

Mechanical insulation is defined to encompass all thermal, acoustical, and personnel safety requirements in:

  • Mechanical piping and equipment for hot and cold applications
  • HVAC applications
  • Refrigeration and other low-temperature piping and equipment applications.

Mechanical insulation applications in the commercial sector include education, health care, institutional, retail and wholesale, office, food processing, light manufacturing, and similar facilities, while the industrial section includes power, petrochemical, chemical, pulp and paper, refining, gas processing, brewery, and heavy manufacturing facilities.

Surveys can be useful tools for all facets of the industry for benchmarking; providing meaningful information to shareholders, investors, or the financial community; informing current or recruiting potential employees; developing strategic or tactical business plans; reviewing historical trends and projecting future performance; and a host of other uses. This survey provides a 30,000-foot view of the mechanical insulation market, which is a portion of the overall NIA World of commercial and industrial insulation.

The information obtained from reviewing any survey is subject to individual interpretation; the NIA Industry Measurement Survey is no exception to that rule. That being said, there are a few general observations or interpretations worth noting from a national perspective. Regional or local trends may or may not be applicable to these national observations. These observations are also product and labor affiliation generic.

  • The market growth was driven more by demand than by price. The ratio between the two is not known, but it is generally felt that during 2007 and a portion of 2008, price did play a positive role. However, price potentially had a negative effect in the latter half of 2008.
  • The estimated ratio of labor to material and percentage of material flowing through the distribution channel did not substantially change from year to year, which supports the market growth observations.
  • Informal surveys indicated margins at the contractor and distributor level increased over the 2-year period; however, erosion begin in mid to late 2008. The informality of the margin survey did not yield an aggregate estimate, so margins were left unchanged for consistency of reporting.
  • As discussed in previous surveys, determining the mix of commercial and industrial applications was not within the survey’s scope. However, a general consensus was that both markets were strong in 2007. The commercial market began showing some signs of weakening in the second and third quarters of 2008, while the industrial market remained relatively strong.
  • Initial discussions related to the survey results were overshadowed by the current economic trends, especially in the commercial segment. The impact of the economic recession is being felt by all industry segments, and its extent will be determined in the next survey. It is important to remember that any decline is starting from a much higher base.
  • Industry has focused on the importance of energy conservation and efficiency and the reduction of greenhouse gas emissions for years. It is felt those initiatives did play a role in the growth over the 2-year period, but the extent could not be determined with the current survey methodology. The increased focus on energy independence, protecting the environment, and job creation in the economic recovery will elevate the importance of mechanical insulation’s contribution and support new growth opportunities.

Overall, 2007 and 2008 were good—some would say great—years for the industry. The industry grew significantly in a relatively short period. All segments (manufacturing, distribution, fabrication, and contracting) responded successfully to the challenges that growth spurts can bring. But there was little time, if any, for celebration, thanks to the economy. Before the ink was dry on 2007, the industry’s success was overshadowed by economic fears. It seemed 2008 was a year of caution and preparation for the expectations of 2009 and beyond. Welcome to the real world: Yesterday was great, but what does tomorrow bring?

The NIA World of commercial and industrial insulation has confronted many obstacles in its history. It has always responded, rebounded, and grown over time. The U.S. and global economies are presenting challenges, the scope of which may not have been seen in quite some time, but they are also presenting opportunities. Mechanical insulation is on the verge of finally being recognized for its value as a viable and meaningful energy conservation/efficiency and greenhouse gas reduction initiative, a contributor to the sustainability or green movement, and a “shovel ready” option to support the economic stimulus package. Now could be the time many of us “old timers” have always dreamed of.

Our industry is strong, prepared for tomorrow’s challenges and positioned to address opportunities. We should celebrate our success in 2007 and 2008, and although it may be difficult to believe today, we will eventually celebrate the opportunities created by the current economy.

To the NIA Associate members who participated in the survey, to all the individuals who contributed to the informal survey supporting data, and to all contributors to NIA’s Foundation for Education, Training, and Industry Advancement: thank you! The Foundation and your support are making a difference.