R-22 And The 2020 Year Gamble

About a month ago I wrote an article about the falling price of R-22 refrigerant. This time of year it is very unusual to see the price of refrigerant falling, especially with how drastic R-22 has gone down over the past year. If we rewind to this time last year we were seeing prices around five-hundred to even six-hundred dollars a cylinder. In June of this year the price was around three-hundred and thirty dollars for a thirty pound cylinder and as I write this article in early August the price has remained right about the same.

While this price decrease is great for end users and consumers it has also hurt a lot of distributors and HVAC contractors out there. Refrigerant has always been a speculation game and while it is not as volatile as the oil market the price can change just as fast. In 2017 when the prices were sky high nearly everyone was thinking that the price would only go higher as we got closer and closer to the year 2020. You see, in 2020 the production and import of R-22 will be banned across the United States. This is in accordance to the Montreal Protocol to phase out CFC and HCFC refrigerants.

Most everyone’s thinking was that with 2020 only a few years away and the price on R-22 getting higher that the time to buy was now. Might as well get in early before the price gets so high it’s no longer reachable. So, a lot of folks bought up on R-22 during that 2017 season. In fact, this buy-up across the country contributed to the drastic price increase that we saw. Because of everyone was buying up the price jumped, but only temporarily. With refrigerants we always see the price jump in summer and then start to taper off and lower during the fall and winter season. (I always like to buy in December or January when the price is at it’s lowest.)

Well, what happened in the 2017/2018 winter is that the price dropped and dropped. More so then usual. All of the distributors and contractors now had a surplus of R-22. No one had a need to purchase any. This lack of demand continued towards spring and now into summer. The market had been flooded due to the ‘panicked’ buying of 2017. The usual slow uptick in price that we normally saw start in spring and into summer was gone and everyone was now stuck with the low three to four-hundred priced cylinders.

The Gamble

During the high priced 2017 year a lot of companies and individuals decided to gamble on the future pricing of R-22. It was a tough call and no one really knew what was going to happen, but if you succeeded then the rewards would be amazing. Imagine, buying a cylinder for five-hundred dollars in 2017 and then turning around and selling that same cylinder for eight or nine-hundred dollars just a year or two later. Now, times that cylinder by forty for a pallet of R-22. Then, times that pallet by twenty for a container shipment. That’s one-hundred and twenty-thousand in profit selling at eight-hundred a cylinder. At nine-hundred a cylinder you’re looking at one-hundred and sixty-thousand profit.

Hudson Stock Price
Hudson Stock Price

I can definitely see how that profit lured some people into purchasing large quantities of R-22, but there was a reason this was a gamble folks. The price bombed and now these companies are having to make the tough decision on rather to unload their R-22 inventory at a loss or to hold onto their stockpiles and hope for the best. Will the price go up by the time we hit 2020? Will they be able to make a profit, or at least break even?

One such company, Hudson Technologies, made this gamble and are now paying for it this summer. Now, I don’t know exactly how much they purchased but I do know they have a large surplus of R-22 just waiting for the price to climb back up. Their second quarter earnings report came out today and within those earnings I found something astonishing. Last quarter Hudson wrote off fourteen million dollars worth of inventory due to the decline in refrigerant pricing. Fourteen million! Remember, that is just a cost adjustment and not the ACTUAL value of their refrigerant inventory. Imagine the position they would be in if the price had climbed. That’s why they call it a gamble though folks.

Because of these inventory write offs, among other factors, the Hudson stock has gone down and down since the past year. As you can see in the picture to the right this time last year the stock was around nine dollars and now this year we’re under two dollars.

Investing into Hudson has been a hot topic lately in the refrigerant world and many people are buying it up due to the very low cost of the stock. The hope is that the R-22 price will begin to climb again and Hudson’s stock along with it. The good news is that even though Hudson had that inventory write off they still ended up breaking even for the second quarter. So, while the company itself isn’t in trouble, their R-22 inventory definitely is.

Hudson Tech shares have lost about 69.7% since the beginning of the year versus the S&P 500’s gain of 6.9%. – Source


The future of R-22 is anything but certain. As the summer moves on and we inch closer to fall the price of R-22 still remains stagnant. If I was to guess I would say that the price is going to go down even further as we approach winter. We may even end up seeing a flat three-hundred dollar price per cylinder around December and January. As for 2019 it is anybody’s guess. By then, many distributors surpluses may have run out and the price could start creeping up again.

Another factor to consider is that 2019 is the LAST summer season for R-22 before the ban takes hold. After January 1st, 2020 no more imports or production. We will only be left with reclaimed R-22 or alternatives. While 2019 may see an increase I do not foresee us reaching the levels we saw in 2017. Perhaps four to five-hundred a cylinder. The year 2020 will be a totally different story as the companies who do have their surplus refrigerant in reserve will began to release it in waves to offset the lack of production or imports. If done correctly, it will keep the market stable at a certain price. If done incorrectly, the market will be flooded just like it was back in 2017. Only time will tell what happens next.

Thanks for reading,

Alec Johnson



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