Why Refrigerant Gas Prices Increase A Lot Recently?

In 2023, my country's second-generation R22 production quota will be reduced by 19.1% at an accelerated pace (according to the 19th Conference of the Parties to the Montreal Protocol, it should be reduced by 35% in 2020 and 67.5% in 2025), and there are expectations for reduction in 2025. This leads to a contraction in supply and an increase in product prices. For third-generation fluorine refrigerants, the quota baseline period is from 2020 to 2022. In order to compete for production quotas, industry companies expanded production capacity before entering the baseline, resulting in serious overcapacity. During the quota competition period, the industry experienced fierce competition and product prices fell. Some companies suffered serious losses and were forced to suspend production.

Earlier, the "2024 Total Hydrofluorocarbon Quota Setting and Allocation Plan" issued by the Ministry of Ecology and Environment clarified the total domestic HFCs production, import, and internal production quotas and the enterprise quota allocation plan. The implementation of this policy has made domestic refrigerant supply face rigid constraints, and the disorderly competition in the industry is also expected to be improved.

This means that even if market demand increases, manufacturers cannot increase production beyond their quota limits. Therefore, the supply side is refined and constrained, leading to price increases.

The demand for refrigerants mainly comes from rigid demand fields such as household air conditioners, automobiles, refrigeration and refrigeration, and the demand in these fields is growing steadily.

According to AVC production monitoring data, the total domestic household air conditioner production in April was 20.73 million units, of which 12.05 million units were scheduled for domestic sales, a year-on-year increase of 18.5%; and 8.68 million units were scheduled for export, a year-on-year increase of 28.8%. As the weather gets warmer, demand will drive the prosperity of the industrial chain to significantly strengthen.

According to statistics from the Cold Chain Logistics Professional Committee of the China Federation of Logistics and Purchasing, in the first quarter of this year, the total demand of my country's cold chain logistics industry was 116 million tons, a year-on-year increase of 5.2%, among which the demand for cold chain such as high-quality fruits and vegetables has increased significantly. In the first three months of this year, the total revenue of my country's cold chain logistics was 139.25 billion yuan, a year-on-year increase of 4.7%. The increase in cold chain freight rates in some regions such as Yunnan and Guangxi played a certain role in promoting this.

In addition, the contraction of overseas refrigerant supply has also caused some customers to switch to domestic purchases, further pushing up demand.

Fluorite is an important raw material for refrigerant production. Its price increase has been transmitted to the cost support of hydrogen fluoride companies, further pushing up refrigerant prices.

At present, the operating rate of domestic fluorspar companies has increased slightly, the mining of upstream mines is tight, and backward mines will continue to be eliminated. In terms of new mines, mineral survey work is still full of difficulties. Although the recovery of construction in the north is acceptable, due to the impact of policies, the overall operating rate in the southern market needs to be improved. The differentiation between the north and the south has not yet improved. In addition, the holders are reluctant to sell in the market, so the market Raw materials at affordable prices are hard to find, resulting in tight supply in the fluorite market.

From a policy perspective, the National Mine Safety Supervision Bureau recently issued the "Notice on Carrying out Special Rectification of Fluorite Mine Safety Production" requiring Hebei, Inner Mongolia, Zhejiang and other areas with many fluorite mining companies and prominent problems and hidden dangers to formulate plans to close and exit One batch, integration and reorganization of one batch, transformation and upgrading of one batch, the "three batches" work list and continued to tackle difficulties, strongly promote the stability and improvement of the safety production order of fluorite mines. In anticipation of stricter safety supervision, the supply of refrigerant raw material fluorspar has tightened, and the supply and demand pattern of the entire fluorine chemical industry chain is expected to continue to optimize.

There is a gap in expectations for macroeconomic policies in 2024, and there is room for improvement in refrigerant-related demand such as real estate, automobiles, and exports. This has provided support for refrigerant demand, thus helping prices rise.