Greetings folks! I hope everyone had a great January and was able to stay warm during the Polar Vortex. Kansas City didn’t get it as bad as some other areas as we only got down to negative five. (Only!) I apologize for not updating the past few weeks but we all need a little R and R every now and then.
As most of you know I came from the automotive industry, specifically trucking. While in this industry I was responsible for purchasing R-134a for our dealerships. After doing this for a few years I found that the absolute best time to buy is right now. Yes, January and February are the best time to purchase refrigerants rather it be R-134a, R-410A, R-404A, or anything else.
The Why
There are a few reasons you should consider buying right now. As the year progresses and we get into the spring and summer months the price on refrigerants steadily begins to creep up. This is due to demand and the hotter weather. As we all know, more demand equals higher pricing. This is why it makes sense to buy most of your company’s yearly demand in the down season while the prices are still quite low.
That being said, I wouldn’t recommend purchasing in November or December either. Depending on the year you could see the high summer prices extend even to the fall months. With some years I’ve seen exceptional pricing last all the way to mid November. The demand and the pricing that followed finally begins to die down in December and is pretty much non-existent in January. This causes the price to drop to it’s lowest point.
Even though January has the absolute best prices a lot of companies will wait until the magical month of February. This may be due to the pricing being right around the same and that we’re another month closer to spring and summer. That’s one less month of sitting on expensive inventory.
Late last month we had a trucking company go through our bulk purchasing program. After some negotiations they ended up buying a full trailer load of R-134a from us. For those that don’t know, a trailer load consists of twenty pallets of forty cylinders each. (Eight-hundred cylinders.) Just about a week later we had another trucking company purchase just under five trailer loads. That’s nearly four-thousand cylinders.
All of these large purchases are designed to give companies the best price in the market, to insulate them from seasonal price increases, and to also fill their demand for the entire season.
The Risk
It’s not all a bed of roses though folks. There is a risk to purchasing like this. Refrigerant is a commodity and it’s pricing can change with just the snap of a finger. In previous articles I equated it to the price of oil. We always see in the news that oil prices are going up and down every week or even every day. While refrigerant isn’t as volatile as oil is, it is important to know that the prices can go down or up at any moment.
While it is fairly standard for prices to go up during prime season it is not always the case. There are a variety of reasons that prices could actually go down in the hot months of summer. It could be oversupply across the country. Or, it could be a very mild summer and the need for air conditioning just isn’t there. Whatever the reason is, you should know that there is the possibility of prices going down as well as going up in prime season.
Let’s look at a worst case scenario. Say your company bought a trailer load of refrigerant this week and you got what you believe was an aggressive price. As the months go by and summer arrives you begin to notice that you are getting priced out of the market. Your competitors are quoting fifteen to twenty percent lower then you. You are now stuck with overpriced product. Do you sell at a loss? Do you buy some at the lower price and hold onto your current inventory? Do you write off the cost difference as a loss and move on?
Conclusion
While the above scenario isn’t a pretty picture I can assure you that the other end of the spectrum is. Imagine for a moment that you purchased a trailer load product at ninety dollars a cylinder. Then, as summer arrives, the price goes up and up until it hits over one-hundred and fifty dollars a cylinder. Now you are in a great position to make a killing and still undercut some of your competition.
Whatever you decide to do with your company’s refrigerant needs this year just remember that there is no right or wrong answer. No one knows for certain what will happen within the market this year. There are always going to be winners and losers. Here’s hoping you’re on the winning side!
If you are interested in purchasing please contact us and we’ll do our best to get your an aggressive price.