2018 R-404A Refrigerant Pricing Predictions

So did everyone pay a fair price on R-404A this spring and summer? Hah… I thought so. If you are like me and the rest of the world then I can guarantee that you saw a steep price rise occur on 404A towards the beginning of 2017’s season. That isn’t even mentioning the price increase that we saw in 2016 either. Well, folks I wish I had some good news for you but I think we may be in the same boat again for 2018.

This right here is why I take the time to write these articles each and every year. It’s a lot of fun to dig into the information and figure out why. Why did this price increase happen? What can we do to avoid this? Will it happen again in 2018? Let’s dive in and take a look at the facts:

Considerations

Like with any good analysis we have to look at the considerations and outside factors that will affect the price on R-404A in 2018 before we can make an attempt at an accurate price prediction for next summer. Let’s take a look:

  • There was a worldwide shortage of R-125 during the summer of 2017. For those of you who do not know R-404A is a blended refrigerant comprising of 44 percent R-125. The majority of R-125 is sourced from China and something happened over the spring and summer of 2017 that caused the shortage that we all felt in our pocket books. I spent some time researching why this happened. The most common explanation that I found is that the chemical Flurospar experienced a forty percent price increase towards the beginning of 2017. (Flurospar is a main ingredient in the R-125 refrigerant.) This price increase caused a direct effect on the price of R-125 raising it by one-hundred and thirty percent. The price increase on Flurospar was blamed on China’s strengthening of environmental laws that directly affect the mining industry. So, because China wanted to become more environmentally conscious we all paid the price.
  • A lot of people already know about the tariffs on R-134a Chinese imports. This was put in place by the International Trade Commission in the spring of 2017. What a lot of people don’t know is that there are tariffs also on imported Chinese HFC refrigerant blends, such as R-404A. R-404A is a blended refrigerant. It consists of R-125 (44 Percent), R-143a (52 percent), and R-134a. (4 percent.) These tariffs on blended refrigerants can range from 101.82% to 216.37%. (These variances depend on cost of the product at the time of import.) These tariffs were put in place in the summer of 2016 so a lot of us have already seen the affect over 2017’s summer.
  • Most of us know by now that R-404A is on it’s way out. I’ll get into the EPA’s new rules further down this list but for now let’s take a look at the viable alternatives to 404A. Because if there are alternatives then their is a path to phase out. The two main contenders that I see are:
    • The first one is R-744 or Carbon Dioxide. R-744 is widely used in the Asian markets and has been seen making an aggressive push here in the United States due to it’s baseline GWP number and the fact that the technology is already here and available to use. A lot of vending machines, ice machines, and other smaller units are beginning to come with R-744 now.
    • The big change that I see coming is the new Opteon HFO refrigerant known as XP44 or R-452A. This refrigerant is designed for commercial refrigeration and chillers. A prime example and a huge market that will be transitioning over is trucking. Earlier this year the Carrier Transicold corporation announced that they will be offering their trucks with R-452A refrigerant as well as 404A. Thermoking isn’t too far behind either.
  • Honeywell announced that they will stop selling R-404A refrigerant in the European Union next year. While this is mainly due to the EU’s F-Gas regulation it is also a huge step in showing the world that 404A is not going to be around for much longer.
  • In the summer of 2015 the EPA came out with their new SNAP Rule 20. This new rule specifically targeted HFC refrigerants and the first major HFC refrigerant targeted was R-404A. While the courts did overturn this new rule in the summer of 2017 there is now an appeal on file to reinstate the restrictions. At this time the world and I will be treating R-404A like it is being phased out. To read more about the EPA’s SNAP Rule 20 program click here or read the excerpts below. Note that R-404A will no longer be acceptable in the below applications:
    • Retrofitted supermarket systems as of July 20, 2016;
    • New supermarket systems as of Jan. 1, 2017;
    • Retrofitted remote condensing units as of July 20, 2016;
    • New remote condensing units as of Jan. 1, 2018;
    • Retrofitted vending machines as of July 20, 2016;
    • New vending machines as of Jan. 1, 2019;
    • Retrofitted stand-alone retail food refrigeration equipment as of July 20, 2016;
    • New stand-alone medium-temperature units with a compressor capacity below 2,200 Btuh and not containing a flooded evaporator as of Jan. 1, 2019;
    • New stand-alone medium-temperature units with a compressor capacity equal to or greater than 2,200 Btuh and stand-alone medium-temperature units containing a flooded evaporator as of Jan. 1, 2020; and
    • New stand-alone low-temperature units as of Jan. 1, 2020.
  • The last point that I’m going to make here before moving on is that while the approved applications for 404A are shrinking and shrinking it should be noted that the actual supply and production 404A is not being forcibly shrunk. What that means is that the government isn’t stepping in like they did with R-22 and saying that you can only produce/import X much per year. It is up to the manufacturers to balance the supply and demand with the shrinking marketplace and not the government.

Price Predictions

I’ve been doing these price prediction articles for a few years now and it has given me a unique opportunity to see the trend in pricing of R-404A over the years. Before I get into my prediction let’s take a quick look to see how the pricing has climbed over the years. Keep in mind that these prices are based off the standard 404A twenty-four pound cylinder and purchasing one at a time. The prices are obviously lower if you are purchasing a pallet or more. (Pallet pricing is about $140 a cylinder as of today.)

Those numbers are crazy. I’m not even sure where to begin. So between 2015-2016 we had a twenty percent jump. Then from 2016 to 2017 we jumped up like crazy. Eight percent price increase. This happened because of the new tariffs we discussed and also the shortage of R-125. Since the summer of 2017 prices have started to taper back down but they are still high at around $175 for a cylinder.

Here’s where I give you the bad news folks. I think we’re going to experience the same thing again next year. Once the season gets going we are still going to have to contend with all of the factors that I mentioned above. The only bright side that I can find is that Honeywell won’t be providing 404A to Europe anymore so they may have a bit of a backlog of inventory that will help keep prices from spiking too high.

My pricing prediction for the summer of 2018 R-404A is around $210.00 a cylinder. If you were to purchase a pallet of forty cylinders next summer expect to see a price in the $160s per cylinder. I wish I had better news for you folks but these numbers are what the facts all point too.

Conclusion

The question a lot of you may be asking is how can I avoid this price gouging situation during next year’s summer? Well folks, the answer is pretty simple and it’s exactly what I used to do when I purchased R-134a. Buy in bulk and buy in the dead of winter. Prices aren’t going to go any lower then they are in December and January. It’s a simple supply and demand concept. Barely any one is buying at this time and the demand is all but stopped unless your are in Phoenix.

Distributors still have numbers to meet. Sure they have their curved budgets for the summer months but they will gladly take a large sale and will be more than willing to cut you a deal so that they can get the business. Yes, you will have to sit on your inventory for a bit but think about how comfortable you will be in the summer, and if the pricing does sky rocket again you can sit back and make a ton of profit off each pound you sell while your competitors are paying sky-high prices.

Thanks for reading,

Alec Johnson

RefrigerantHQ

Sources

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