Pricing Prediction

2019 R-404A Refrigerant Pricing Predictions

Here it is in the middle of November and we’ve already had two snow storms here in Kansas City. As I write this article this morning the snow is still coming down. Luckily, I have the day off and am able to stay inside and watch the snow fall. Over the past few weeks here at RefrigerantHQ we have been focusing on our refrigerant prediction articles for the 2019 year. Most everyone was interested in our R-22 thoughts, and a bit of you read the 410A. I know that R-404A is a smaller market, but it still has it’s uses and is still kept the back of a technician’s van… even if it’s going to be phased out soon.

Last year in our 2018 prediction article we said that prices would be around one-hundred and sixty dollars a cylinder. Well folks, just like we were with R-410A… we were way off again. Today the price on a pallet of 404A is between eighty to ninety dollars a cylinder. So, the cost is about half of what I predicted it would be. This just goes to show you how much of a guessing game this all is. Again, like with R-410A, our increased cost prediction came from the shortage of Flurospar that we saw in the spring of 2017. For those that do not know, Flurospar is a key ingredient when manufacturing the refrigerant R-125 and R-125 is a key ingredient in the blended refrigerant R-404A. (R-404A is a blend of R-125, R-143a, and R-134a.) So, when Flurospar prices go up so does the cost of R-404A. Back in 2017 the shortage occurred due to environmental regulation changes in China. This was a one time change and the industry needed to adapt. For now, the market seems to have adjusted and the shortage has come to an end.

The question now though folks is what will the pricing do next year? Will R-404A keep going lower? Will it stay put? Or, will we see it climb back to the higher priced levels that most of are used to?

Considerations

I’ve mentioned this countless times before, but when I do a prediction article I like to take into consideration certain factors. I don’t like to just throw a dart on the board. No, instead I like to do an analysis and take a look at the marketplace. Once we determine these factors we can then determine what the market will do. Or, at the minimum, we can provide an educated guess. For those of you who read my R-410A prediction article you may notice that some of these considerations are the same for R-404A. That is by design folks. Remember, that R-125 is a key ingredient in both refrigerants. The key difference is that 410A is much more popular then 404A and that 404A is one of the first global targeted refrigerants to be phased down.

Let’s take a look at some of the considerations that can affect the R-404A price next year.

Repeal of EPA’s SNAP Rule 20

I’ve written about this extensively over the past few months, but in August of last year a Federal Court overturned the EPA’s planned phase down of HFC refrigerants across the country. While there were many appeals done over the past year each one of them has failed. That includes an appeal to the Supreme Court. What we are left with now is a patchwork of States putting together their own HFC phase downs. The reason I mention this as a consideration is that R-404A was one of the first targeted HFCs to be phased down. This is due to the extremely high GWP of 404A. (Three-thousand nine-hundred and twenty-two.) Most everyone was expecting the 404A phase downs to begin very soon, but now everything is in question and that can cause price instability.

Flurospar Shortage

I mentioned this earlier in our previous section. If we travel back about eighteen months ago this was a HUGE deal. The majority of the world’s Flurospar comes with mines in China. During the spring and summer of 2017 there were governmental regulation changes that affected the efficiency and overall output of the mines. This lower output is what accounted for the world’s shortage. In my previous analysis I assumed this shortage would carry into 2018, but I was incorrect. Will we see a shortage though in 2019? It is impossible to say. The only thing I can point to is the overall stability of the Flurospar market over the past year.

Chinese Refrigerant Imports

Back in 2016 there was an anti-dumping tariff instigated against Chinese HFC refrigerant blends. Included in this tariff was R-404A. I won’t get into all of the details here, but essentially there was a tariff put on R-404A. (For more information on the tariff click here to be taken to TheCoolingPost.) Here’s the thing though folks, this tariff was installed on ONLY the R-404A blended refrigerant and NOT the components of the blend. In other words R-404A was taxed but R-125, R-143a, and R-134a was not. (Well, R-134a was taxed, but through a different tariff.)

Refrigerant distributors took advantage of this loophole and began importing mass quantities of R-125. Once imported they would then blend the refrigerants in their own facility. The dumping of cheap HFC refrigerants continued. This mass import of Chinese product has attributed to the lower cost of R-404A that we are seeing today. Tom Lenz of Lenz Sales & Distribution said,

The price on 404A has been relatively stable over the past few months. Most of the time it stays right above 410A at around fifteen to twenty dollars higher. (A cylinder) Some distributors mix in house while others buy in bulk from China.

Trump & His Tariffs

Most of the country has felt the effects of the various tariffs that the Trump Administration has issued over the past year. This could either be through your employer or just paying for basic things. In my day job I had to travel to Belgium a few months back to work with our corporate office. The reason for the trip? Trump’s Tariffs and how to enact them throughout the company. Whatever your politics are, we can definitely say that these tariffs have had an impact. Refrigerant, for the most part, has been left unscathed on these tariffs. With all of these imports coming from China though, how long is it before a tariff is enacted? What if one is enforced on R-125? How will that effect the marketplace? Inevitably it will lead to higher prices, but how much?

Prediction

I’ve been doing these refrigerant pricing articles for nearly four years now and over those years I have been able to gather a historical pricing tracker on R-404A. This tracker allows us to see trends and possibly what’s to come next.

  • 2015 – $90.00 – Source
  • 2016 – $110.00 – Source
  • 2017 – $200.00 – Source
  • 2017 (Winter) – $175.00  – (Ebay.com)
  • 2018 (Fall/Winter) – $80-90 a cylinder.
  • 2018 (Fall/Winter) Retail – $150.00 – (Ebay.com)

Our previous articles had focused more on the retail side of pricing as you can see from the above historical records. However, this year I wanted to focus more on wholesale pricing. That is why I included the $80-$90 a cylinder section for 2018. The question now on everyone’s mind is what will 404A do next year? Like with my other articles I have consulted with experts and distributors within the industry for their thoughts. The consensus that I received was that the price would remain relatively stable over this winter and into the summer of next year. The only wildcard out there that I am aware of are Trump’s Tariffs. If he installs a tariff on refrigerants, say R-125, we could see price rise substantially. If no tariffs are instigated then I could see the price remain stable.

Our prediction on R-404A next year is right around the same price we have today between eighty to ninety dollars for a twenty-four pound cylinder.  The market should remain stable throughout next year, especially due to the EPA’s Rule 20 being rescinded. Chad Schnuelle of Refrigerants Inc said,

It seems that 404 has been rather stable for the past two years. I checked my purchase history and it has not moved over twenty dollars per 24lb cylinder since January of 2017. Again, I feel the Chinese market still dictates the USA market. In my opinion I feel the only factor that may change the price will be if refrigerants are added to the Trump tax.

Conclusion

I want to close this article by stating that this was a prediction and it is just that, a guess. No one knows for sure what will happen to the R-404A market next year and if they say they do then they’re lying. It’s a complete guessing game. I can only provide my analysis on the matter and go from there. Lastly, I want to mention that this is one man’s analysis on the market. We here at RefrigerantHQ are not liable for any business losses or gains when it comes to buying and selling R-404A.

Thanks for reading,

Alec Johnson

RefrigerantHQ

Owner

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