It’s already approaching the end of April and the first days of summer will be coming before we know it. The question on everyone’s mind, or at least on my mind, is what will the pricing on R-134a refrigerant do this year? How does the pricing compare to last year? Is it going to jump up during the summer, stay flat, or plummet to under fifty dollars a cylinder?
Well let’s dig into my prediction for the summer. Also, please note that I said prediction. Refrigerants are a commodity and the pricing can move back and forth wildly depending on numerous factors. I always like to compare refrigerant pricing to that of the price oil. The price of oil changes and adjusts weekly, sometimes even daily. Refrigerant is much the same way. I’ve seen some summers where the price triples right when the days get hottest and I’ve seen some where the price barely moves even in the hottest days in August. So, with that said note that this is my prediction.
Factors to Consider
When looking at pricing for the summer there are a few factors to review:
- Pricing on bulk R-134a is the absolute lowest that I’ve seen it since I’ve been in the automotive industry. In my nine years in the industry the lowest price that I had seen was low sixties for a pallet of R-134a. Today many distributors are selling for high fifties and some are even selling as low as fifty-six dollars for a pallet of thirty pound cylinders.
- In July of 2015 the United States’ Environmental Protection Agency announced that they would be phasing out R-134a usage across the country. By the year 2020 R-134a will be deemed unacceptable for use by light duty automotive manufacturers. I wrote an article about this last year and it can be found by clicking here. It’s worth noting that this is the first step in the phaseout of R-134a. Once the automotive manufactures are no longer using it on newer models the EPA will begin to go after production and imports of R134a refrigerants.
- There is a lawsuit currently being reviewed by the United State’s International Trade Commission on R-134a Chinese imports. This is significant if the Trade Commission rules in favor of the American Chlorofluorocarbon Coalition. If they rule in favor than that will mean large tariffs imposed on Chinese imports of R134a. If these tariffs get instated than that will give the American manufacturers of R-134a free reign to increase their cost across the country as well. (There will be no cheap competition anymore.) This could mean a large across the board price increase on all R-134a rather it be domestic or import. The Trade Commission is expected to make a ruling in the middle of August this year, although just this month they signified that they were leaning towards approving the tariffs. I wrote an article on this as well and it can be found by clicking here.
Pricing Analysis
Alright, so here’s the meat and potatoes. Here’s the reason you’re reading. After reviewing the above facts and watching the marketplace over the past few months I honestly do not see the price of R-134a changing much at all on a bulk purchasing level. When the season gets going and the heat comes in I could see the price rising MAYBE ten dollars more a cylinder topping out at around seventy dollars for a pallet of thirty pound cylinders. The only catch is what happens on August 10th, 2016. Does the Trade Commission rule in favor or against?
Here is my reasoning:
- Everyone is seeing such a low cost on R-134a right now due to the anti-dumping lawsuit that was filed with the Trade Commission in June of last year. You would expect it to have the opposite effect and increase cost across the board but what has actually happened is companies recognized this lawsuit and the damage that it could cause to the market. So, many businesses decided to import as much R-134a as they could and flood the market now before a yes or no decision was made on the lawsuit. Many of them thought that they could sit on the excess inventory until the ruling came and sell it all off at hopefully a much higher cost. The problem was is that everyone else had the same idea. Now the market is filled with imports and the price has tanked to the lowest I’ve seen in ten years.
- If the tariffs do get approved the official ruling will not come until August 10th, 2016. So, everyone will still be doing the status quo and selling through their inventory until the season is ninety percent over. But again, if the ruling does get approved I could see the price on R-134a sky rocketing to nearly one-hundred and thirty dollars a cylinder in September of 2016. There were nearly a quarter million Chinese cylinders that were imported in 2015. Can you imagine the effect a large increase would have across the market?
- Last year when the EPA announced the first steps of phasing out R-134a I honestly expected to see a large price increase, or at least a bump in pricing for a few weeks. I was surprised when there was little, or no reaction at all. At first price remained the same and then it started to drop. (Again, I believe the price dropped due to the flood of imports from last year.) I feel that this ruling and eventual phaseout will have no effect on current 2016 pricing levels.
Closing
Alright, so there were a whole lot of words here all to say that I believe the price will more or less stay the same throughout the 2016 summer season. Today people are buying at $56-$62 for a pallet of thirty pound cylinders. During the June and July months I could see it creep up to high $60s and maybe even low $70s… but I do not see it going much higher than that. Just keep in mind that ominous date of August 10th, 2016. After that date the pricing on R-134a could go haywire. Who knows, if they rule against the lawsuit the price could drop even more and end up in the low $50s. It is anyone’s guess at this point.