In March of 2020, Italy captured global headlines, gaining the unenviable title of being one of the European countries hardest hit by COVID- 19. A year on, the country, and its people, have remained resilient despite the unprecedented challenges brought on by the first wave of the pandemic, slowly moving towards a sense of normalcy while navigating the second surge in cases. Weighing in on the market outlook following the initial outbreak, Samuele Peli, General Manager Sales, Europe Middle East Africa, Seeley International Europe says there has been a strong rebound in real GDP over the summer, when the Italian economy recovered almost three fourths of the output loss incurred in the first half of 2020. “However, rising infection and hospitalisation rates straight after the summer season required the government to re-impose restrictions on mobility and economic activity, implying an output contraction in autumn and winter 2021,” he says.

For Massimo Minicucci, Brand Manager, Cipriani Heat Exchangers, the response to the first wave was largely insufficient. “Everyone had underestimated the consequences, believing the worst was over and not equipping themselves for what was unfortunately to come,” he says. “Therefore, the government, finding itself unprepared again, failed to give the right support to Italian companies, which nevertheless did not give up and have always sought new methods to continue producing, while respecting anti-Covid regulations.”

The impact the pandemic had on the manufacturing sector is undeniable. Sharing figures, Peli says there was an average drop of 15% in the demand and supply side in the Italian manufacturing sector following the COVID-19 outbreak. “In this critical context, the only sector that has gone significantly against the trend was pharmaceuticals, with a growth of 4% in 2020,” he says. “By 2021, however, a significant rebound is expected, with a growth in revenues of greater than 5%. In the 2022-2024 period, manufacturing activity is expected to continue along a path of gradual recovery, at annual rates of almost 3%. “Peli says that the industrial sector, which accounts for a large share of the Italian economy, and the construction sector, continue to operate without major restrictions. “After an 11.3% drop in 2020, Italian export is expected to bounce back by 9.3% in 2021, with HVAC&R being one of the leading sectors,” he says. “By contrast, contact-intensive services, including tourism, catering and hospitality, continue to reel under the pandemic’s economic impact and are taking the brunt of the imposed selective lockdown measures.”

Marco Portale, Regional Marketing Manager HVAC for EMEA, Carel adds that companies in the best position to cope with the restrictions were those that implemented smart and flexible manufacturing strategies from the beginning. “We are in the middle of the supply chain as we supply to our customers and we also buy components for our products,” he says. “From what I have seen, the companies that had a global footprint in terms of manufacturing were the ones able to produce products in different locations and meet the demand despite possible logistical problems.”

Portale says companies during this time also moved from relying on one supplier to sourcing from multiple suppliers whenever possible, such as when the components were not custom-made. “From a manufacturing point of view, players that have a global footprint were able to work through the lockdowns in different regions of the world,” he says, adding that Carel was able to leverage its  manufacturing bases in other areas in this manner and operated for its customers with a single company – multiple source approach. “Some OEMs also pushed their manufacturing capability harder than in the past for some of their customers and distributors,” he says. “This was because many of them decided to increase their order stock and pushed the original equipment manufacturers (OEMs) to produce more pieces so they can make stock in case there was a second or third wave, so, in some aspects, the OEM was challenged and had higher demand.”

Minicucci says that the resiliency of the manufacturing sector can also be attributed to increasingly automated processes, pointing out that the reduced human presence in favour of machines has proven to be a great advantage for many companies. However, he adds that even for companies, such as Cipriani, where manual processing is an essential part of product development, they have managed to adapt to government regulations to minimise infections both in production facilities and in the offices. “This effort has been rewarded by the very low number of infected people in the company,” he says. “All this without ever slowing down production to satisfy every need of our customers who have continued to trust us.” Overall, Minicucci says that while the Italian HVACR market has suffered a severe blow, it is showing signs of recovery.

A RENEWED FOCUS ON QUALITY IAQ

COVID-19 has also pushed the industry to place a stronger focus on indoor air quality (IAQ), in view of its effect on health and wellbeing. For Peli, this is evidenced by initiatives of leading organisations, such as the Italian Association of Air Conditioning, Heating and Refrigeration (AICARR) and National Health Institute (ISS) both of which have issued guidelines in line with European Directives calling for increased fresh air, reduced or no recirculation and better control strategies. “Specific protocols have been developed for ‘special systems’ such as those serving hospitals and healthcare environments, clean room and laboratories,” he says. “As most air conditioning systems for commercial buildings were historically designed to operate with most of the air recirculated, they would not have normally coped with the new guidelines prescribing minimal or no recirculation at all.”

Peli adds that commercial buildings, including offices and schools, have coped with the new approach mostly because of the low occupancy rates from March 2020 onwards, following lockdown or restriction measures. “However, it is largely agreed in the HVAC community that over the next months or years, massive investments will have to go into upgrading HVAC systems to allow them to operate at full load with little or no recirculation,” he says.

This is especially crucial in schools, which has large scope for improvement. Peli points out that although schools were closed and were heavily dependent on ‘remote learning’ after the first wave, upon reopening in September 2020 the Ministry for Education issued guidelines encouraging higher ventilation rates but little investments were put in place to improve existing systems. Quoting AICARR president Filippo Busato, in an interview from October 2020, Peli also calls for a ‘modernisation of schools still without mechanical ventilation systems improving air quality’.

Minicucci echoes this observation. “Italian schools are in dire need of modernisation and safety, as most were built more than 40 years ago, and time has made them less and less safe,” he says. Portale adds that recent guidelines also touches on basic and simple behaviours which are equally important low-hanging fruits “Of course, you cannot always replace and make sudden, dramatic changes to your units because in many instances, existing ventilation units have certain limitations,” he says. “So, there were such guidelines to open the window to let in more fresh air, or in instances where there are units installed, for better maintenance procedures, which means changing, controlling and cleaning the filters.”

A GROWING DEMAND

Peli adds that many of these protocols are being reviewed periodically as scientists get a better understanding of how the virus spreads, but that this generally feeds into increasing demand for systems and technologies that provide higher portions of fresh outdoor air. He says that this can be seen in the increased request for humidifiers in certain applications as well as for filtration and sensors for air quality monitoring.

While the trend is generally a positive, Portale is quick to point out that “nothing comes for free” and that by implementing these strategies we cannot deny that energy efficiency will take a hit. “The priority is to ensure safety first, so recommendations were for more fresh air and less recirculation,” he says. However, Minicucci adds that the lockdown has been used as an opportunity to carry out structural and energy efficiency improvements. He says that the latter is especially of interest for the company considering the heat exchanger contributes to more efficient performance, adding that there has been increased demand for these types of equipment in recent months. “Many projects are currently focused on enhancing heating given the recent need to continue to ventilate the classrooms to decrease the risk of contagion,” he says. “In this way the heating systems are required to have more power to maintain an acceptable temperature in the classrooms.”

Portale says that many of these guidelines are still in place and can be seen in how the country is dealing with the second wave of cases. “In new projects, we have seen there is a higher sensitivity for IAQ,” he says. “Even if there is no government legislation or changes in regulation yet, hygiene units are being more frequently installed in the hospitals as well as in commercial and light commercial buildings. Typical units with higher hygienic standards featuring certified components, despite being more expensive, are also being requested and installed in hospitals. Will this continue after the pandemic? That is the question we have yet to answer.”

Portale says that considering units with hygienic standards are usually more expensive, there must be some initiative from the government or from the EU to drive adoption of these solutions, or else the market will revert to the standard situation where hygienic units are only used in hospitals and standard units are used for the rest of commercial and residential applications. “There might be a European Union plan to sustain the recovery of European countries’ economy,” he says. “In that case the driver is in the direction of energy savings, not on indoor air quality.

However, in case we go back to standard units after the pandemic — we will not forget about IAQ at all. At the very least we will probably come back to an intermediate level of appreciation for these types of solutions.” Overall, Portale remains positive. “Italian manufacturers, both as a component supplier and as a unit supplier have a long tradition of innovation,” he says. “As result, I have seen companies reacting pretty well in being able to fulfil these higher demands and adjusting the supply chain in terms of supporting more IAQ-related products and components demand, with the same flexibility.” He adds that this will make a case for companies entering the Middle East market, which also has seen good presence from European manufacturers.

Minicucci also believes there is a lot of opportunities in the horizon for the Italian HVACR market in general, despite these challenges. “The situation is still uncertain, but the largest trade fairs in the sector are moving to digitise themselves with initiatives that I believe are laudable,” he says. “The movement must not stop, certainly it has slowed down but networking is a fundamental part for the business of our sector and therefore we are waiting for the situation to improve in order to return to attend international fairs. In the meantime, we are still moving towards digital, still taking advantage of the wide visibility that these initiatives can provide.”