The tropical or generally warm climate that the Latin American region registers (even the winters of the southern cone), confirm that the air conditioning market will surely continue to grow, especially the splits and mini-splits models. A look at the region.
By: Diana Agudelo
The air conditioning market underwent a gigantic change during the past year. The world's gaze was mainly on the need to increase profits and green technologies, which begin to help the world recover all the damage that has been done to the earth and the environment.
The economies of the Central and South American countries have expanded and are moving towards the tourism industry, the hotel industry, the development of real estate and the general flourishing of the construction industry, which will be reflected – and is to be expected – in an increasing need for the purchase of air conditioners from the better quality.
According to the air conditioning marketing experts consulted, the quality of the product, the reputation of the distributor and the time it takes to operate, are the most important factors when it comes to selling solutions to industrial customers. North American products are considered the best at meeting these requirements. For residential users, product reputation, quality and price are the factors to pursue. For commercial users, price, as a crucial element, followed by after-sales service, are the fundamental characteristics that must be achieved as producers.
Market demands
Depending on the cost of electricity in each country, a calculation could be made of the needs and growth of the different sectors of air conditioners.
The demand for splits and mini-splits in industrial and commercial sectors has grown more exponentially than residential needs. An area that will always be promising is tourism and construction, especially large buildings or that target people from the highest segment, such as luxury hotels or large shopping centers.
Current and existing models that have to do with the parameters of residential electricity consumption, indicate an increase of two to four percent, for each increase of one degree Celsius in ambient temperatures.
Long-term climate change will also effectively affect energy consumption through the increase and saturation of the air conditioning market.
The Latin American market, without risks of generalizing, has been growing more and more. Although oil companies are the largest companies in the region when it comes to sales, it is the mining companies that generate the most profits, good news for those who, like the air conditioning industry, depend on these products for the improvement and final sale of their products.
América Economía magazine pointed to Los Pelambres of Chile, Cerro Verde of Peru and MBR of Brazil as the companies (mining) that returned the most profits, according to the capital invested.
Of the 500 most important companies, 207 are from Brazil, 111 from Mexico, 63 came from Chile and 41 from Argentina. There were also 35 Colombian companies, 18 Peruvian, 12 Venezuelan, three in Costa Rica and the same number in Ecuador, two from Panama, Guatemala and Uruguay and one in El Salvador.
With this panorama and the growth of 43% projected for next year, companies that offer products and services to the two American subcontinents, have to be attentive to such a large level of growth, which only compares to that of China.
Maintaining prices and growth, in addition to an innovation in efficiency and decrease in the level of energy used, should be the objectives pursued by air conditioner manufacturers in the region.
The ARI (Air Conditioning and Refrigeration Institute) offers data that demonstrate the importance of the growth and expansion of the Latin American market, including in the United States. "Steady and strong growth in minority and immigrant households results in an estimated 22 million homeowners over the next 20 years. The construction sector will also bring records in the production and sales of air conditioners in the coming years by more than 4.4 percent."
Systems that adapt
The true wealth of supply shows when thinking about a system for households. The ideal is to plan the cooling mode with the project managers when designing the spaces, since the costs of installing large-scale equipment vary greatly depending on whether they use air ducts or pipes for water or cooling gas.
Other recommended equipment, depending on the use you want to give, are the roof-top units (a large outdoor unit), or cold water (transports water instead of air), which allows different indoor units.
At the residential level, the use of mini-splits continues to gain popularity and it is already common to acquire these units in chain or self-service stores. Builders go so far as to leave the preparations to install a high-walled unit as an added value to the resident.
With the constant rise in the cost of electricity, more efficient systems will be demanded. Several countries are beginning to standardize the minimum efficiency required, for example Brazil and Mexico.
At the same time, indoor air quality becomes important. It seeks to eliminate air pollutants in large cities. Businesses are looking to maintain or increase productivity and air conditioning can contribute to that.
New technological developments will give us smarter systems, which manage energy consumption, control humidity, can self-diagnose and have remote control access, including the internet.
Looking into the present
Split units can be said to have their main applications in the residential market and in general split systems are used more than the central system internationally.
This is due to its versatility and the flexibility granted by installing the condenser in a small space. The package unit is bulkier and installed outside. In lightweight commercial applications such as offices and restaurants, the package unit becomes popular for its easy installation.
In industrial applications, the selection depends on specific needs. A central ice water system has its main use in commercial and industrial applications, serving an entire building or a specific process.
The sale of split and mini-split equipment has skyrocketed worryingly, in recent years, on the contrary the sale of residential package type units has fallen. This is because it is easier, faster and cheaper to install this type of equipment in the construction of houses and new rooms. The installation of this type of units does not require as much space (ducts) and is faster.
" Split and mini-split systems are systems that will continue to increase their sales volume, because 85% of the construction of new room houses require these systems, more than any other," says Francisco Raúl Chavolla Ramírez, Sales Manager of LG Electronics Mexico.
It can be said that the main changes that have occurred in the past year are the increase due to the need for products to be more efficient, there is new regulation (in North America) that determines the levels of efficiency and use of refrigerants, which will transform the offer of products by manufacturers interested in subsisting in recent years and finally, the importance that Brazil and Mexico have already adopted new regulations and efficiencies for residential air conditioners.
It is important to emphasize that there must be a balance between the design requirements and the investment made. A mini-split system is outlined to provide comfort to a room or environment. However, it has limited control over relative humidity and air quality. There are systems that use the indoor units of the mini-splits and condition several environments. These are called multi-splits, where a single condenser is connected to several units in different environments.
It is necessary to remember that central systems in general will have greater capacity and condition simultaneously to several environments. As mentioned above with the split system you have better control of latent and sensitive capacity.
Temperature, humidity, air distribution and its quality, noise level and energy savings must be considered in each project. In addition, the initial cost, operation and maintenance must be evaluated.
With all these considerations at hand, the first thing to think about and what our interviewees agree on is the importance that environmental protection laws have gained.
"In Latin America, residential products in the HVAC segment are growing mainly through the mini-split group, while in the United States, the segment continues to grow primarily in multi-splits," says César Serrano, Director of Building Efficiency Distribution at Johnson Controls, Latin America.
Which presents a marked contrast, in just 12 months of difference, because in the United States, the central systems, used to be the best sellers, while in South America and the rest of the world they were the divided systems.
To conclude, Alfredo Díaz, of Trane, adds by way of warning that "it is important to emphasize the increase in minimum energy efficiency. The United States increased the annualized energy ratio from 10 to 13 SEER for equipment under 6.25 tons of refrigeration. China reformed efficiency regulation in 2006, eventually providing for discontinuing equipment with efficiencies of less than SEER 10. In addition, variable refrigerant flow systems have recently gained popularity in the residential environment, where several environments can be conditioned with a single condensing unit. The units are of the mini-split type. This system surpasses the conventional multi-split where you only have two or three units."
Segmentation in the region
Globally, mini-split systems have displaced window units and have begun to be used as an alternative to central units (package and split) in the residential and light commercial areas.
The main incentive has been the initial cost and the possibility of progressively conditioning the environments by adding units to each new environment. An important factor has been the globalization of the air conditioning industry and the reduction of costs due to economies of scale.
In Latin America, Mexico is the country where more equipment of this type is sold. Followed by Brazil, Venezuela and Argentina.
"The largest economy in the region is Brazil and by extension, it is one of the largest consumer markets of all countries. A combination of favorable climate and beneficial conditions, in addition to sustained economic growth, make Brazil the most attractive market for residential HVAC products," concludes Serrano of Johnson Controls Latin America.
"It's definitely a big and interesting market for any air conditioning equipment manufacturer. There is a great difference with respect to other continents since in Europe and Asia for example, inverter technology is already being used even in mini-splits and multi-splits, and although they are more expensive than those we use in Latin America, the market prefers them due to the low consumption of electrical energy and precision in the comfort that these equipment offer. Latin America has been very slow to accept the technology since there is a need for regulations that promote the use of it," adds Chavolla Ramírez, of LG Electronics Mexico.
The mini-split system was developed in Asia and that is where the largest consumers and manufacturers of them are located. According to JARN (Japanese Air Conditioning, Heating and Cooling News), China has surpassed Japan in mini-split production capacity. Thailand and Taiwan also concentrate an outstanding number of manufacturers.
Recall that the mini-split originally replaced the window unit, which does not use ducts, it is a quieter, more efficient unit with better aesthetic attributes. Central ducted systems have been manufactured primarily in the United States since this country is the largest consumer.
Companies continue to see how the Latin American market increasingly represents better values and needs more attention. "LG has been growing dramatically in the past five years and will continue to grow thanks to the distribution channels we have, in Mexico and Latin America," concludes Francisco Chavolla.
"The internet, wireless communication technologies and improved product transportation allow this region a better level of competition. The ability to adapt products effectively and efficiently to the specific regulations of each market and to the sales and production codes that arise every day, whether corresponding to energy levels and characteristics, efficiency levels or local electricity and safety codes, will be the factors that ensure the success of any company and market segments in the future," says Serrano of Johnson Controls Latin America.
The teams will follow a route, still difficult to overcome. The cost is affected not only by the exchange rate parity, but also by the rising price of inputs or raw materials. The cost of copper, aluminium and steel has increased markedly globally. Therefore the industry in general is affected in the long term.
Products from Asia are finally starting to show an increase. There is also international pressure for China to release the exchange of its currency with what is expected to be reduced in its competitiveness. Residential projects are the hardest hit with cost increases.
The future of air conditioning companies in both Downtown and South America depends on offering integrated HVAC/R solutions, expanding into other markets, and promising to efficiently improve energy costs and the use of environmentally friendly materials.
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