Supply And Demand Imbalance of Third-generation Refrigerants

In accordance with the Kigali Amendment to the Montreal Protocol,

Production quotas in China for second-generation refrigerants (R22, etc.) will be reduced at an accelerated pace by 23% year-on-year in 2025; meanwhile, the quota system for third-generation refrigerants (R32, etc.) will continue to be implemented. This policy direction is reshaping the entire industry landscape and driving the refrigerant market into a new boom cycle.

More importantly, the current capacity utilization rate for second-generation refrigerants has exceeded 90%, and small and medium-sized enterprises are rapidly exiting the market. For third-generation refrigerants, the total quota remains stable, and new capacity additions are strictly limited by environmental approvals. This means that the supply side has bottomed out, while demand continues to rise.

Current supply and demand comparison:

Supply side: The total quota for third-generation refrigerants remains stable, but new production capacity is strictly limited by environmental approvals, leading to increasing industry concentration. Currently, the industry's CR3 (top 3 companies) exceeds 60%, with leading enterprises controlling pricing power.

Demand side: With the rapid development of emerging industries such as new energy vehicles, 5G base stations, and data centers, the demand for efficient and environmentally friendly refrigerants continues to grow. For example, each new energy vehicle requires approximately 0.6 kg of HFO-1234yf, while traditional fuel vehicles only require 0.5 kg of R134a. Although the coefficient of performance (COP) of HFO-1234yf is 5.3% lower than that of R134a, its environmental advantages are significant, accelerating its replacement of traditional refrigerants.

Due to this supply-demand imbalance, the price of third-generation refrigerants is expected to continue to rise. Industry data shows that the price of R32 has increased from 18,000 yuan/ton at the beginning of 2023 to the current 28,000 yuan/ton, an increase of 55.6%. And this trend is only just beginning.