The Coming Monoply on R-22 Reclamation

Some of you may have already come to this realization but it dawned on me the other day when researching for an article. When the year 2020 hits the importing or production of R-22 will be completely banned in the United States. While that may sound like a long ways away I have to warn you right now that 2020 is just barely two years away. Two more summer seasons to go through and then no more R-22 production. Sound serious? Well it is!

With no means of importing or producing new R-22 there are only two solutions left to obtain R-22 for you or your customers when that 2020 deadline hits.

  1. The first option are all the distributors or third party warehouses who took it upon themselves to buy up a bunch of R-22 years before the ban went into effect. They bought pallets of this stuff and then sat on it waiting for the price to go up and up. I can only imagine what the price will do once that 2020 date hits. The downside of buying from these guys is that they have a limited supply of product and will most likely sell out extremely fast.
  2. The second option and the more reliable and steady option is reclamation. Most of you do this now with your old recovered refrigerant from various customers. You have a tank that you store at the shop that you send back every once and a while to be reclaimed. The reclaimer pays you for your ‘dirty’ refrigerant then you go on your way. The one thing I can tell you right is that when that 2020 deadline hits get ready for a huge increase in the reclamation industry.

Certified EPA Refrigerant Reclaimers

This is where things get a bit tricky. In order to legally reclaim refrigerants you have to be approved by the United States’ Environmental Protection Agency. This isn’t an easy process and in fact there is a series of checks that you have to go through before you are even considered. The official checklist can be found by clicking here. As you can see there is a strong barrier of entry in order to become a refrigerant reclaimer.

Some companies see this upcoming R-22 phaseout in 2020 as a golden opportunity. Why you may ask? Well as I said before the only way to get R-22 after the reserves have run out is through reclaiming. So, that means that the reclaimers get to set the price and get to control the supply in the marketplace. If you think prices on R-22 are bad right now just imagine what they will be once that restriction goes into place. Lots and lots of profits to be made.

Over the past decade or so the refrigerant distribution and reclamation companies have been shrinking and shrinking. This isn’t due to attrition but more so due to buy-outs and acquisitions. After the dust has settled we are left with two major players in the refrigerant distribution and reclamation. These two companies are A-Gas Americas and Hudson Technologies. Both of these companies have grown exponentially over the years and have made some rather large acquisitions during the process. Remember Coolgas? I do. A-Gas Americas bought them out a few years back. Remember Airgas? I do as well. Hudson bought them out just a few months ago.

Refrigerant distribution wasn’t the only thing on these two companies minds when they started making company purchases. Reclamation has been a key role in their decisions. All it takes is look at some of the acquisitions over the past few years. A-Gas acquiring Rapid Recovery. A-Gas acquires Refri-Claim. A-Gas purchases Diversified Pure Chem Refrigerants. Hudson acquiring Airgas Refrigerants. All of these companies that were purchased had a strong reclamation background as well as distribution.

Concern

I mentioned above that to be a refrigerant reclaimer you have to be certified with the EPA. Well the EPA has a list on their website that displays all of their certified reclaimers within the United States. The list can be found by clicking here. My concern when looking at this list is seeing names that I recognize. I’m seeing names that I know that have already been bought out and are now a part of either the Hudson or the A-Gas umbrella. Names like Coolgas, Rapid Recovery, Airgas (Now ASPEN), Diversified Pure Chem, Hudson, and others. How much more will this list of reclaimers consolidate over the next couple years? How many more companies will these two giants purchase? What will this do to the market and to the competing reclaimers out there?

My fear is that these larger companies will be able to undercut all of the little guys out there on R-22 and other refrigerants. The larger companies will keep on growing while the little guys will either fold or be acquired. On top of that can you imagine what will happen to the price of R-22 if the market gets even more consolidated? If I was talking to a homeowner or business owner I would highly advise them to switch away from R-22 and over to 410A before that 2020 deadline hits. However, if you are on the other side of the coin then this is a golden opportunity for Hudson and A-Gas. Think about it. These two companies will practically control the market on R-22.

Conclusion

While Hudson and A-Gas are setting themselves up with all of these acquisitions I still have to say that it is a gamble. Yes, the R-22 supply will be cut severely when 2020 hits but the question and the gamble at hand is will the demand still be there? What will the demand look like on R-22 in 2020? By then the absolute youngest R-22 machine on the market would be at least ten years old. (Unless you had a dry unit installed.) Ten years old is getting up there on an air conditioner. Yes, the average life is about fifteen to twenty years but after about ten years things to begin to break and fail. If one of those failures resulted in a refrigerant leak then I can assure you that the customer weighed his options on either repairing and recharging or getting a whole new R-410A system. He’s not going to want to pay that R-22 recharge bill again.

So, that’s the question folks. Will Hudson and A-Gas be on the winning side and make a killing on R-22 reclamation in 2020 and beyond? Or, will the market have died down by then and have been replaced with R-410A? It’s a gamble. Either way these two companies still made solid acquisitions and have definitely strengthened their reclamation ability. If it’s not R-22 their reclaiming then it’s something else.

Thanks for reading and if you enjoyed the article please take the time to subscribe to my mailing list which can be found in the top right corner of my page.

Alec Johnson

RefrigerantHQ

 

You may also like