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Made in Germany

After the annus horribilis that was 2009, the German HVACR industry is showing signs of getting on the growth path. Jose Franco reports.

| | Feb 15, 2010 | 11:16 am
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After the annus horribilis that was 2009, the German HVACR industry is showing signs of getting on the growth path. Jose Franco reports.

In a scenario where every manufacturer or distributor is driving in search of better opportunities in the HVAC&R industry, it seems that all roads lead to the Arab world, particularly Saudi Arabia. And it seems that most products and technological know-how are coming from the West, especially Europe’s biggest economy, Germany.

It may have been overtaken by China as the world’s largest exporter, but Germany still stands tall among the highly developed nations for its high-quality products and industrial knowledge. So much so that it has tremendous experience and know-how to offer other countries, particularly the Gulf Arab states. This could be on various fields like engineering and solar energy.

Being the world’s top installer of photovoltaics, or the PV cells that help convert solar radiation into direct current electricity, Germany has a feed-in tariff for renewable energy. This tariff is a policy mechanism providing for the adoption of renewable energy sources towards grid parity, wherein electricity is equal to or cheaper than grid power.

This is one sector where the Germans could very well help the Gulf economies and the wider Middle East region, which has a year-round supply of strong sunlight. But there must be strong policy coming from governments. In the UAE, for instance, where electricity is cheaper relative to other economies outside the Gulf, government must lead the way for the development of solar energy projects by offering incentives to actual developers.

“Yes, Germany has a lot to offer when it comes to solar energy technology,” says Dubai-based Tarek Hourani, Technical Sales Manager of Al Sahoo Trading Company, whose business started off with plumbing equipment and has diversified into the HVAC&R industry. “But the UAE government has to dictate the development of the sector by targeting actual developers and offering them incentives, to advance this endeavour.” He has no immediate suggestions on the kind of incentives that could be made available to developers, however. But he says that in Europe, incentives for increased solar power use are in the form of lower taxes.

As stressed by Hourani, the UAE doesn’t have any project, save for the Abu Dhabi National Energy Company, or Masdar, which is devoted to advancing the development and use of solar energy. It’s unlike in other parts of the Middle East, such as Lebanon, Syria and Jordan where the sector is developed, owing perhaps to higher prices of power consumption.

German companies have lots to offer the Middle East market, all right, but they face the challenge of coming up with the same high-quality products with affordable prizes, owing to the slump in global trade. They need to invest more in research and development for traditional products in, say, the HVAC&R industry, but aiming for lower cheaper production.

“We see the trend going towards medium-size quality due to the economic crunch,” says Hourani. “This means a demand for innovative companies to use new technology in doing the same job and products at lower costs.”

Dubai-based Adel Kamel, Managing Director for the Middle East of Güntner, admits that German products are a bit pricey. “[O]ur price is the major challenge for customers to agree with,” he notes. “Yet we are an established and leading brand, not to mention a brand that’s constantly innovating, so customers know that they are getting value for their money.”

Germany has lost to China in world exports, with the latter breaking a 13-month decline in trade as a result of the global downturn. China’s state news agency, Xinhua reported in January that China’s exports rose 17.7% in December, with total exports for 2009 at $1.2 trillion (£749bn), though total foreign trade over the year was down 13.9%.

“It is safe to say now that Chinese exporters have come right through the period of weakness,” Xinhua quoted statistician, Huang Guohua as saying. The slowing decline in Chinese trade may also be a sign that its $586-billion stimulus package is working. As a country in the middle of transforming itself into a more modern and industrialised economy, China needs significant development. And experts say the country is fiscally strong enough to finance its plans for increased spending on infrastructure projects, as it sits on piles of cash.

Industrial production in Germany was also down 2.6% in December, owing partly to weaker production of cars and machinery. While a government’s car-scrapping bonus programme boosted car sales in the country for much of last year, this expired in September. Output in the construction sector was unfavourable as well, dropping by 2.6%. However, the German economy this year will climb by 1.4% – described by economists as a steady but unspectacular growth – as export markets pick up.

Another big challenge facing foreign HVAC&R manufacturers wanting to do business in the Middle East is the region’s climate, which has high temperatures during summer and is hot most of the year. Dust is another major concern for outdoor units as well as well as lowkey maintenance, Kamel says, while the lack of technical know-how on the part of the users is also a challenge that should be addressed through better customer service.

Noting that major refrigeration consultancies in the Middle East are foreignbased, Kamel says the lack of regional expertise hampers optimal and efficient designs. In a region where water is scarce, manufacturers should consider concerns on energy saving, carbon-footprint reduction and overall more eco-friendly systems. “Since water is in scarcity, we are seeing gradual changes in the market with regard to using water as a coolant,” he says. “Regions like Central Saudi Arabia are regulating this trend very effectively, and this is where dry-coolers come into the picture as major roleplayers.”

He, likewise, notes the current trend of refrigerants taking a turn to being less ozone-depleting, paving the way for increased usage of ammonia, which is a natural refrigerant. He also welcomes the fact that most warehouses for industrial refrigeration are increasingly investing in quality engineering to increase the systems’ lifespan, as they are undergoing complete automation.

“[W]e at Güntner believe deeply in continuous innovation,” he opines. “We recently launched our revolutionary condenser series named Microox, which is based on micro-channel head exchanger technology. “Compared to conventional fin and tube condensers, Microox is a whole new game altogether.” The firm’s new microox technology makes its condensers smaller but more efficient heat exchangers that have protection against galvanic corrosion.

Such German innovation is the stuff that the Middle East’s HVAC&R industry could possibly benefit from.

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