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HFC Refrigerant Pricing Alert – May 2019

In the beginning of this year I got into the habit of writing refrigerant pricing updates as I saw them coming. Most of these have been fairly benign with a few percent increases here and there. It was last month though that I wrote a pricing update that had pricing doubling on some of the most popular refrigerants in just a matter of days. The article can be found here.

This huge jump in price can be tied to a new suit filed with the Department of Commerce. This suit which was filed by the HFC Coalition aimed at installing anti-dumping tariffs on HFC components. For those of you that do not know, a few years back there were anti-dumping tariffs put on some of the most popular HFC refrigerants used today: R-410A and R-404A. These tariffs targeted Chinese product that was being unloaded in the United States at ultra low prices.

The problem with these tariffs though was how they were written. The tariffs themselves ONLY applied to R-410A and R-404A. Remember folks, that these two products are blended refrigerants. While the tariff was on the finished product it wasn’t on the components to make the blend. So, your refrigerants like R-125 and R-32 were immune from the anti-dumping. This resulted in a halting of imports of R-410A/R-404A and instead we saw massive importing of the components to blend these refrigerants. This flood of refrigerant components caused the price to stay pretty much were it was before the anti-dumping tariffs were installed. Nothing had changed except now distributors were blending Chinese refrigerants in the United States.

The Suit

I won’t get into all of the details here as it would be repetitive from my last article. Instead I’ll give a short summary and then move onto the update. In order to prevent these low prices and the continuing flood of Chinese refrigerants a suit was introduced to the Department of Commerce. This suit aimed at solving the problem when it comes to HFC refrigerant blends by adding a tariff to ANY HFC components that were used to create a blend within the United States. In other words, you can import R-125 all day long but the moment you use R-125 to create R-410A then you have to pay a tariff.

This suit was filed in early April and originally a decision was to be made today May 20th, 2019. Well, the deadline came and went and there was still no decision made. Instead the Department of Commerce issued a statement saying:

“According to 19 CFR 351.225(c)(2), “{w}ithin 45 days of the date of receipt of an application for a scope ruling, the Secretary will issue a final ruling under paragraph (d) of this section or will initiate a scope inquiry under paragraph (e) of this section.” However, “unless expressly precluded by statute, the Secretary may, for good cause, extend any time limit.” We have determined that additional time is required to review and assess the HFC Coalition’s request. Thus, in accordance with 19 CFR 351.302(b), we are extending the time-period for initiating a formal anti-circumvention inquiry by 45 days, until July 3, 2019.”

So, the can has been kicked down the road and we are now left with even more uncertainty. Before I get into pricing I want to make sure everyone understands that IF the DOC decides to take this suit up on July 3rd then EVERY blended refrigerant from July 3rd up until the decision date of the suit could be retroactively taxed the tariff. So, if I imported a heap of R-125 and R-32 in August, mixed them as 410A, and then sold them in September then I could be liable for tariffs… even if the DOC’s decision doesn’t come until February of 2020.

Pricing Update

That clause I just mentioned above is why we saw prices go crazy last April. The price of HFC refrigerants seemed to jump overnight when news of this hit the industry. Everyone was buying up as much as they could from their distributors and the distributors were buying as much as they could from China before a decision was made to accept the suit or not. In some cases we saw prices double.

Today however, I have good news. The prices on HFCs have begun to settle down. It’s hard to say exactly why this is but it appears that the initial shock of tariffs on components have worn off. Or, it could be that everyone and their brother have bought up so much that the demand has ultimately died down. Whatever the reason is prices have gone down since May. While we are still not near where we were before, we are in a much better spot then we were a month ago.

In my last article I did a break down of pricing on R-410A and R-404A. Let’s take a look again but with this week’s prices:

R-410A – Twenty-Five Pound Cylinder Pricing:

  • Fall 2017 – $140
  • Fall 2018 – $65
  • Jan 2019 – $68
  • Feb 2019 – $56
  • Mar 2019 – $49
  • Apr 2019 – $100 – News of possible tariffs
  • May 2019 – $78

R-404A – Twenty-Four Pound Cylinder Pricing:

  • Fall 2017 – $175
  • Fall 2018 – $80
  • Jan 2019 – $70
  • Feb 2019 – $58
  • Mar 2019 – $50
  • Apr 2019 – $105 – News of possible tariffs
  • May 2019 – $89

Conclusion

As you can see, we are moving downwards… but it is very tough to say what will happen in the future. There is still a lot of uncertainty in the industry and it is anyone’s guess as to what the Department of Commerce will decide on July 3rd.

One other point to mention here is that there was some talk on the latest tariffs from the Trump Administration. These tariffs are unrelated to the anti-dumping tariffs but are instead retaliatory taxes in the ongoing trade war between the United States and China. They were to be twenty-five percent on selected harmonized codes.

At first I understood that HFC refrigerants, and components, were affected by this tariff. But now, I have heard that an exemption was made specifically for HFC components. I have searched online trying to find specific information but it is quite murky, and I have not been able to find anything concrete. If any of you have further information on this topic please reach out to me and I will update this article.

Thanks for reading and hope everyone has a great Memorial Day! I’ve got a barbecue with my name no it. Cheers!

Alec Johnson

RefrigerantHQ

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