Colder Spring to Keep Refrigerant Prices Stable?

As we all know the refrigerant and air conditioning industry is highly seasonal. Depending on the intensity of that season we could see prices climb and climb like we have in the past. Sometimes these price increases don’t even begin to drop back to baseline levels until October or even November. While there are always other factors in play for refrigerant pricing like tariffs or phase downs I would say the biggest factor is seasonality.

Here’s the thing though it’s all a guessing game. No one knows for sure what the weather is going to bring for next Spring or Summer. Sure, you can read the Farmer’s Almanac and all that to get an educated guess but even then it’s still a guess. When I was a buyer for Kenworth Trucks we would end up buying ALL of our air conditioning parts and R-134a refrigerant in the month of February. There was a few reasons we did this. The first was that the product was at it’s cheapest at this point. There was very little demand and buying up ensured the best price. The other reason was more of a gamble. We would purchase a few trailer loads of R-134a (About sixteen-hundred cylinders.) at the cheapest off-season price we could get. We did this in hopes of a hot and brutal Summer. As the temperatures got warmer we would watch the market and raise our selling price accordingly. On particular bad Summers we would start out making ten percent on 134a and end the summer making fifty percent margin all because we had that lower cost product we bought up back in February. On the other hand if we had a cold Summer then we ended up sitting on all that of inventory. In some cases we actually saw prices drop in the summer below what we paid and we ended up selling at a loss. Like I said, it’s a gamble.

Spring 2018

Look at this Spring so far in 2018. Now I don’t know where you are at in the country, or outside of the country, but over here in Kansas City we have had one hell of an unusual Spring. Usually by this time I’m grilling some burgers and watching my girls play in the backyard. Instead it’s been so cold we’ve been cooped up for most of the day. In fact just last Sunday we had snow in the afternoon. (I mowed our ten acres during that snowfall, not a fun time!) Today was our first truly nice day with temperatures rising into the seventies. But, even with that beautiful day the upcoming forecast calls for more snow on Saturday and Sunday. The temperatures are dipping back down into the twenties overnight and thirties for the day. I’m seeing reports of this all over the Country.

My parents, who run a local plant nursery, have seen a lot of their plants die from the aggressive frost this year. Usually this time of year they’re selling plants left and right but traffic has been substantially down. It has just been too cold to do much. I like to use them as my barometer as to what will be coming in the Summer months. If they’re selling plants and trees like crazy in March then I know it’s going to be a good year. So far, it’s been a quiet season due to this darned cold. Doesn’t bode well.

On the refrigerant side of things I am not meeting my 2018 budget. While I am still up from last year I had much higher hopes for March and this April so far. Most of us in this industry wish for a long and hot Summer season. The hotter the temperature the more the machines run and the higher chance of failures. Failures mean sales and refrigerant usage. While this increased demand is good for business it is bad for the price of refrigerant.  As we are getting closer and closer to May and June I am starting to believe that we will have a much colder summer then usual. That means less service calls and less work. It’s always tough to see technicians just hanging around the shop waiting for a call.

If I was to put a guess on what refrigerant pricing will do this Summer when it comes to seasonality then I would say that we’re going to stay relatively flat demand and price wise. If we’re going to have the Summer I’m thinking of then there isn’t going to be much demand out there. If you’ve already bought up for the season then I can only hope that we can see the price go up. However, if you haven’t yet then you might just buy enough to get you through and wait and see what this Summer brings.

Let’s all hope for a nice and hot Summer. While I hate those one-hundred degree days here, my business loves them!

Thanks for reading,

Alec Johnson

RefrigerantHQ

 

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