Well folks, I’m already striking out on my prediction for R-134a pricing for next year. I wrote an article towards the beginning of this month stating that the price of R-134a would remain rather stable over the winter and into the summer of 2018. Lo and behold, two major refrigerant distributors announced significant increases in R-134a pricing at about the same time I was writing my article. Hey, they call it a prediction for a reason!
Now, I won’t get into what companies that made these announcements as it doesn’t matter and I don’t want to get on anyone’s bad side here. I will just say that these two companies that made these announcements are major refrigerant distributors that most of you know of. I was made aware of these price change announcements by two of my readers and for that I am very thankful. I’ll take the time now to say if you or anyone else know of any price changes coming down please feel free to reach out to me with the information. I will do my best to spread the knowledge all the while keeping the source close to my chest.
The Price Increase
Alright folks so let’s get onto the changes. The first notification I received was from December 1st, 2017. It stated that this company would be raising prices on R-134a product by $00.75 per pound effective immediately. The reason here wasn’t quite what I expected. It wasn’t due to lack of inventory. There is plenty of inventory at this point in time. No, it actually was due to a shortage of raw materials that are used to manufacture more R-134a. So, this price increase is in anticipation of their inventory being depleted and having to replenish. This was the first notification that I received and I took it with a grain of salt as it may have been just one company that decided to raise pricing.
Today I was notified by another reader of a price increase on R-134a from a different distributor. This distributor was going as far as raising their price by $1.00 per pound. This price change was effective immediately and was explicitly stated that no pre-buys would be allowed. So, if you had some cash to burn before the increase hit you were out of luck. In this letter there was no explanation as to why the increase came but I can only assume that it is blamed on raw materials again. This second notification definitely got my attention and alerted me that something was going on.
First, let’s take a look at that increase. For argument’s sake let’s call the price of a thirty pound cylinder before this price increase at $100.00. We now have an increase of $1.00 per pound. We’re looking at a price of $130.00 or an increase of thirty percent in one day. That is HUGE. Imagine if you go through pallets of this refrigerant per year. There are forty cylinders on a pallet and say a medium dealership will go through a couple pallets per year. With eighty cylinders this price increase alone will cost that dealership another $2,400 in cost. I hope you have some leftover product…
The real question here is why did this increase occur? Everyone is stating that this increase is from a shortage of raw materials. I searched around the internet today looking for any recent articles discussing this sudden price change but I couldn’t find a thing. That’s rare but this change could be too recent for any major stories to be written yet.
I did some further research trying to find out what R-134a is actually made of. It consists of hydrogen fluoride, which is made from flurospar, and trichloroethylene or perchloroethylene. The big thing here is flurospar. Flurospar is what happened to refrigerant pricing towards the beginning of 2017. There was a shortage in China which caused a snowball effect across the world. For some reason, China provides fifty percent of the world’s flurospar. Talk about market control.
Now the cause of the shortage in China isn’t exactly known. I haven’t found concrete information on it except that China has introduced new environmental regulations on mining of flurospar. That could mean a whole host of things that I am not going to speculate on it. The big thing here is to know that we are dependent on the flurospar mining in China. With no flurospar we have no hydrogen fluoride and with no fluroide we have no refrigerant.
During my research I found an article from Thehill.com stating that America isn’t even mining ANY flurospar. Yes, that’s right folks… none. Like so many other things nowadays we are dependent on other countries for our supplies and when those other governments decide to throw a wrench into things we just sit back and take it. Maybe this will change in the future, but for now we are at their mercy.
I can only hope folks that with the lower demand from the European Union and the fact that we are still in the dead of winter here in the United States that this new price will have time to taper off and slowly go back down to normal before the spring and summer HVAC season kicks up again. Who knows though? This shortage of materials may just be a hiccup in the supply chain and it will work itself out before it causes to much impact. If it doesn’t then we could very easily be looking at a summer with 134a prices well above $200.00 a cylinder.
The thing everyone in the industry should be worried about is that if this is due to Flurospar shortage then get ready to see all of your refrigerant pricing go up. R-410A. R-404A. It’s going to be early 2017 all over again. Very few refrigerants are exempt from this. Heck, even the new 1234yf could be affected. Here’s hoping that things calm down before the heat cranks up!
Thanks for reading and as always if you come across any tips or leads feel free to reach out to me.