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Air conditioning market in Saudi ArabiaMarch 2010

Where there was once desert, there will now be what Saudi Arabia calls Economic Cities. With many built from scratch, these cities will fuel a massive demand for air-conditioning products. David Garwood explains.

It might be going through a credit crisis like the rest of the world, but the construction industry in Saudi Arabia is still relatively buoyant. Despite recession, Saudi Arabia remains a very promising market for air-conditioning products, due to its hot climate, high per capita income and rapid population growth.

Although there are some regional differences, air-conditioning products are considered a necessity and are installed in almost all buildings throughout the country. The central region (around Riyadh) has the largest sales, accounting for around 35 per cent, followed by the western region (around Jeddah) which accounts for about 25 per cent. A further 15 per cent of sales are in the east of the country (around Dammam), with the other 25 per cent shared between all other regions.

The high sales of medium and large screw chillers is strongly led by the purchasing power of government-funded projects, particularly as private projects have dwindled during the downturn.

BSRIA understands that the government will be able to sustain a significant investment in construction projects for two years. That said, if the economic crisis continues, and oil prices remain at the current level, it's likely that government spending will sharply diminish. However, if by the end of 2011 the markets stabilise and oil prices recover, the central plant markets could return to very large growth rates, boosted by private investments in both commercial and residential sectors.

So, what exactly is selling in Saudi?

Air handling units


Overview of the estimated central plant air-conditioning market for 2009 by product type. Total unit figure is approximate. Source BSRIA (click image to zoom)
The last few years have seen the larger construction projects playing a major role in the development of the air handling market.

To create the futuristic economic cities, large university sites, modern hospitals and shopping centres, Saudi Arabia has applied strict regulations covering ventilation equipment. For this reason the air handling market will get a major boost over the next decade. To cope with the very large air volumes required in most new buildings, predominantly medium to large and large units are used.

It is estimated that the penetration of heat recovery AHU models in 2008 was around 15 per cent of the total AHU market by value. The main driver for these products is local legislation. For example, in Medina, the authority demands that the exhaust air must pass through a heat-recovery device.

More recently architects and main contractors are encouraged to specify fan-coils for many new applications which will boost this market further.

BSRIA believes the growth of the fan-coil market will closely mirror that of the chiller market (especially the market for screw chillers). However, due to increasing cooling capacities in mid-range applications, the fan-coil market will probably grow slightly above the average growth of the chiller market.

Chillers


Overview of the estimated packaged air-conditioning market for 2009 by product type. Total unit figure is approximate. Source BSRIA (click image to zoom)
Large construction projects require medium to large chillers. Screws are the most important segment of the chiller market, representing more than a half of its value. Centrifugal chillers usually start at 1750 kW, and are set to enjoy the highest long-term growth among all chiller types. BSRIA estimates that their share by value will reach 40 per cent of the chiller market within 3-4 years.

While reciprocating chillers are still in use, their share is diminishing. Scroll chillers are mostly promoted by Carrier, which has the most advanced scroll products. Due to their very high price, absorption chillers are not popular in Saudi Arabia. BSRIA believes these products cost around three times more than any equivalent substitute.

Interestingly, although Saudi's run-out of district cooling projects has slowed, there are many new projects that are planning to use these systems. King Saud University in Riyadh, Girls University in Riyadh, King Abdullah Economic City and many others will fuel the demand for district cooling in the next several years. Large (7 MW) centrifugal chillers tend to be used to serve the district cooling systems.

Packaged air-conditioning

Over the last few years, sales of single-splits in Saudi Arabia have enjoyed high growth in all product categories and capacities. However, the lack of privately-funded investments in the residential sector almost halted this growth, which is highly dependent on the construction of new homes.

It is expected that the market for multi-splits will grow at a high pace albeit from a very low base. Once the market reaches a few thousand units, the growth rate will start to follow the growth of the chiller market.

Variable refrigerant flow (vrf) air-conditioning systems are beginning to make their mark in the whole Middle East region. The market for these products is set to grow at the highest rate among all air-conditioning products in the country. Until 2008, only Daikin was in this market, but now LG has introduced vrf products. Other competitors are likely to follow suit.

As the boom in the telecoms sector ceased a few years ago and private investment dropped significantly in the second half of 2008, BSRIA believes that the close controls market growth will be moderate over the next few years. The market is divided between smaller units dedicated to small telecom shelters and larger units used for computer rooms.

VRF units are almost always used in the commercial sector (notably hotels and office blocks), although some small percentage of sales end up in the residential market where affluent owners insist on having high-tech products.

Refrigerants

Although the Saudi Arabian government ratified the Montreal Protocol, the HCFC phase-out target has not been fixed. SASO, the Saudi Arabian Standard Organisation, will drive the HCFC phase-out. However, due to the inability of local players to make the switch promptly, legislation has been put on hold.

All packaged products (apart from VRFs which are all R410A) sold in Saudi Arabia are fitted with the HCFC R22 refrigerant. Conversely, R134A is predominant in chillers. Global production is shifting away from R22 towards R410A, and this refrigerant will soon predominate.

BSRIA believes that ducted splits will start changing to R410A within the next 3-4 years because the local market will become increasingly dependant on imports. When the switch eventually happens, the industry will go straight to R410A refrigerants, bypassing R407C.

David Garwood is a market researcher at BSRIA. This article is based on research carried out by Dusan Antonijevic for BSRIA.

For more information contact Worldwide Market Intelligence at BSRIA:

T: +44 (0) 1344 465600
E: wmi@bsria.co.uk
W: www.bsria.co.uk/wmi

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