Why Refrgerant Production Quota Dominates Price of Refrigerant Gases?

The refrigerant supply structure remains the core support for long-term price increases, and this long-term trend is expected to continue. Refrigerants, as a typical product with strictly limited supply, are among the few products with sustained long-term profitability improvement. Since the third-generation refrigerant industry has passed the fierce competition of the baseline period from 2020-2022, it has entered a stage of industry-controlled production:

① Companies that did not produce and sell during the quota period 2020-2022 cannot obtain production and sales quotas (unless they purchase quotas at a high price or through mergers and acquisitions);

② Existing manufacturers are also subject to quota production constraints, preventing them from freely and fully expanding their existing production capacity;

③ The industry supply structure is significantly concentrated, with smaller companies gradually being eliminated in the early competition, and only a few companies able to obtain quotas for production;

④ After more than two years of supply chain restructuring, the initial pricing model for refrigerants has been fundamentally reversed. Refrigerants, due to supply-side constraints, have significantly increased their pricing power in the supply chain, and downstream products have manageable price sensitivity during slight price increases;

⑤ Currently, third-generation refrigerants remain the primary solution in multiple refrigerant scenarios, and there are no cost-effective or mature alternatives in the short term. They are expected to maintain a longer lifespan than second-generation refrigerants.

Considering multiple dimensions, the long-term logic of refrigerants remains unchanged. Global refrigerant production quota constraints still exist in China, and 2026 is the last year of the baseline period for hydrofluorocarbon quotas for the second group of developing countries such as India. More countries will be subject to quota constraints in the future. Whether globally or domestically, supply constraints on the production side still exist, and refrigerants still have leading pricing power and quota barriers. Therefore, from a long-term perspective, we remain optimistic about the price increase of refrigerants.