Factors Affecting Refrigerant Supplies and Pricing
In an effort to help understand what is happening, listed below are the factors that have created price and availability uncertainties for many refrigerants in the past few weeks:
1. The American HFC Coalition tariff petition on certain Chinese imported HFC refrigerants filed in June of 2015 was approved in June of 2016 by the U. S. Department of Commerce and confirmed by the International Trade Commission. This decision placed tariffs on key HFC blended refrigerants imported into the United States from China of 101.82% to 216.37%. Any company importing HFC blends from China is now paying the applicable tariffs, eliminating the price advantage these imported blends had prior.
2. Domestic producers of these same blended HFC refrigerants raised their prices to match the new costs of imported HFC refrigerants.
3. In October of 2016 provisions of the 1987 Montreal Protocol terminating HCFC refrigerants due to ozone depletion were extended to HFC refrigerants due to Global Warming Potential. Certain HFC refrigerants were assigned termination schedules based upon the GWP of the component refrigerants used in the blend.
4. The use of R22 continued to decline in the market due to continued rising cost and decreasing availability. However, due to the large number of existing R22 equipment, use of alternative refrigerants for R22 significantly increased.
5. A major component refrigerant for alternative refrigerants for R22 as well as R410a is R125. As significantly higher demand for alternative refrigerants increased along with typical warm weather increase in demand for R410a, a worldwide shortage of R125 quickly occurred.
Put all these factors together and you have the proverbial “perfect storm”. The combined effect of new tariffs raising imported HFC refrigerant costs, domestic producers raising their HFC pricing to match the new higher imported HFC costs, certain HFC refrigerants set for termination (ex. R410a and R404a) due to Global Warming Potential, near exponential increase in the usage of R22 alternative refrigerants, and the resulting worldwide shortage of the major component refrigerant, R125, of both R410a and all of the R22 alternative refrigerants, has resulted in rapidly increasing refrigerant pricing coupled with refrigerant shortages.
Where does it end? Given the current set of circumstances, that is a very difficult question to answer with any certainty. Just be aware that the affected refrigerants are basically the ones you use every day, but especially those in heavy demand such as R410a and the R22 alternatives. The price of R410a has almost doubled in the past three weeks, but do not look at it alone as an indicator of what will happen with all affected 400 series refrigerants. What can be assumed, however, is that pricing will most likely continue to rise for 400 series refrigerants, and until the R125 shortage is remedied, some shortages in supply are likely to occur.
At Refrigerant Solutions, Inc. our pledge is to do all we possibly can to hold down the price of refrigerant while also maintaining adequate supply to meet customer needs. Please always feel free to check with us regularly for up to date and accurate information about what is happening in the refrigerant market.
As always, thank you for your business. It is our privilege to be of service to you.