Hello ladies and gentlemen! It’s that time of year again. The cold wind is blowing, the snow is falling, and the temperature barely gets over twenty degrees across half of the nation. Instead of thinking about the cold I’m thinking about the summer. What will the heat be like next summer? How bad will it be here in Kansas City and how easily can I escape it with my precious air conditioning? (Last year we had nearly an entire month of hundred degree days.)
The refrigerant market is always changing and developing. It seems like every week there is something new and most of the time there is. As we close out 2016 and begin to look forward to the new year to come I find myself thinking about what upcoming changes we will see next year on refrigerant here in the United States. Here are, in my opinion, the three biggest change factors that we will see next year:
1 – Chinese Tariffs
By now I’m sure you heard talk of tariffs on the importing of Chinese refrigerant. Over the past decade the Chinese have been importing larger and larger quantities of R-134a cylinders into the United State’s market. Just in 2015 China imported over 14,000 tons of refrigerant into the United States. (Source) Along with the Chinese flooding our marketplace with their product they are also bringing it in at a substantially lower cost than what our local manufacturers can get to.
Last year if you were to import a container of R-134a refrigerant cylinders into the United States you could pay somewhere between $40-$50 for a thirty pound cylinder. This was practically half the cost of what Chemours or Honeywell were selling at. There was plenty of margin to be made and I could see why importers brought it in by the ton. If I had the opportunity and the storage space I probably would have done it as well. The reason why the Chinese can get their price so low is due to the cheaper labor costs over there but also in big part because of their government subsidizing the industry and artificially lowering their manufacturing cost. This allowed them to go to market at that $40-$50 price and still make a hefty profit.
In order to combat the low priced Chinese product American companies began to file law-suits with the United State’s International Trade Commission. The law-suit was against China’s dumping of R-134a into the marketplace at an unfair value. The American companies lobbied for a tariff to be installed on all of Chinese 134a imports. The first suit was filed towards the end of 2013. Since then numerous suits have been filed and all have been denied by the Trade Commission. The latest suit filed by the HFC coalition, a grouping of American companies, was filed in March of 2016. Unlike the others this suit may actually end up going through.
In September 29th, 2016 the Trade Commission announced a preliminary ruling saying that they were in favor of installing tariffs on imported 134a product. The preliminary tariff percentage they announced was 137.23%. (188.94% on smaller Chinese companies.) This will take a $50 cylinder of 134a up to $118.62. Quite the difference. For more details on the rulings and what to expect click here for a previous article that I wrote.
So, the question on everyone’s mind is what is going to happen in 2017. Well, there are two things for certain. In February the trade commission will announce their final tariff percentage on imported 134a product. Then a month later in March they will announce their final ruling. This is the big kahuna. This is the one that matters. While the other rulings are important this one in March is the yes or no on rather the tariffs will be instigated.
One solace to small business owners and technicians is that the expected price increase from the 134a tariffs has already hit. When the announcement came from the Trade Commission in September of the 137 percent increase the price on 134a skyrocketed to over a $100 a cylinder on bulk purchases. My prediction for 2017 is that if they rule in favor of the tariffs that the price on 134a will pretty much stay the same. However, if they rule against the tariffs than I could see the price of 134a plummet to high $50s per cylinder on a forty cylinder pallet.
Other HFCs as Well?
At this point everybody is expecting the tariffs to eventually get approved. After all, companies have been fighting for them for nearly four years now. Eventually, one of these times, they will get what they want. It’s just a matter of time. The thing to mention is that these suits have all been focused on 134a and not on 410A, 404A, or any other refrigerant.
Are there tariffs expected on these common HFC refrigerants as well? From everything that I have read and seen on the anti-dumping lawsuits I have seen no mention on R-410A or R-404A. At this point in time I believe that there haven’t been measures taken to impose the tariffs on these refrigerants. As far as what will happen in the future I can only guess. I believe that R-404A won’t be bothered with. It’s being phased out in just over a year anyways. To me the one to watch is 410A. This refrigerant is the defacto refrigerant now for home and commercial use. It’s a prime market for the Chinese to target and it’s a prime market for the American companies to fight back on.
In 2017 I see the tariffs on 134a being approved and instigated. Everything is pointing in that direction. For once in many years the price of 134a may actually be stable for a long period of time. If it doesn’t get approved get ready for a roller coaster of back and forth prices as the American companies compete with the Chinese imports.
2 – The Beginning of the End of HFCs
I’m sure most of you guys saw this coming. It was only a matter of time. The beloved HFCs that we have fallen in love with over the past few years are going away. In a meeting in Rwanda in October of this year over one-hundred and seventy countries agreed to and signed an amendment to the Montreal Protocol. This amendment titled The Kigali Agreement is strictly focused on phasing out all HFC refrigerants across the world by the year 2100. Since this was an amendment to an already existing treaty the Obama administration did not need to get approval by congress. Instead, all they had to do was sign. (I’m not too happy about that, but that’s another story and I’ll leave politics out of this.) I wrote a more in-depth article on the Kigali agreement that can be found by clicking here.
Some of you may be asking why HFCs? I thought CFCs and HCFCs were the bad ones. I thought Chlorine was the culprit. Well, yes… that’s true. Chlorine being vented into the atmosphere was the culprit in damaging and eventually tearing a hole into the O-Zone layer. It was because of this Chlorine in the atmosphere that the Montreal Protocol was designed and implemented. The Chlorine containing refrigerants had to be phased out. (R-12, R-22, R-502.) The Montreal Protocol was signed in 1987 and only a few years later R-12 was phased out, then in the late 1990’s R-502 said goodbye. Lastly, in the year 2010 we waved farewell to R-22. As we phased out all of these refrigerants we began to replace them all with the newer HFC refrigerants such as R-134a, R-404A, and R-410A.
How quickly we change our minds. Now that HFCs have been around for a while and have been implemented all across the globe scientists are beginning to realize the impact that they are having on the environment. While they do not contain Chlorine they do contain extremely potent greenhouse gases that when released into the atmosphere are sometimes 1,400 times stronger than Carbon Dioxide. Think about that number for a second. 1,400 times stronger. That is nothing to scoff at. Now think about all of the developing countries in the world who now have the money and business to support air conditioning units. The explosion of industry in India and China coupled with the amount of HFC refrigerants used around the globe made for a perfect storm. The rise of HFCs has correlated directly into the rise of Global Warming. Scientists and governments were determined to stop it.
Something had to be done across the globe and that is just what the Kigali Agreement was designed to do. In only a few years, in 2019, developed countries such as the United States are expected to cut all of their HFC consumption/production of HFC refrigerants by ten percent in comparison to 2011-2013 levels. By the year 2036 we are expected to cut HFC usage by eighty-five percent. These agreements are signed into international law and will have to be followed.
On top of all of those changes the United States’ Environmental Protection Agency has announced that they will be starting earlier on HFC refrigerants. Their first target is R-404A. As of January 1st, 2017 supermarket freezers and cold cases can no longer use R-404A on newly manufactured machines. (Source from Chemours.com.) Retrofitting is not allowed either. As of January 1st, 2019 vending machines can no longer use R-404A or R-134a. That’s not the big dog though. No, not even close. In the year 2020, or 2021 model year, it will no longer be acceptable for light duty vehicles to use R-134a. Instead most vehicle manufacturers will be switching over to the lower GWP HFO refrigerant known as 1234YF.
Like it or not this is the beginning of the end of HFC refrigerants. They had a good run of… fifteen to twenty years. It’s on to bigger and better things. It’s on to hydrocarbons. It’s on to natural refrigerants. It’s on HFOs. At least, it’s on to these refrigerants until we find something wrong with them and then the whole process will start all over again.
3 – The Testing and Pushing of Alternative Refrigerants
Obviously, if we phase out HFC refrigerants we need to find a replacement refrigerant that performs well, is cost consciousness, and does not harm the environment. Somehow, this narrows the list down to only a select few refrigerants. Over the past few years there has been a battle brewing between the newly innovated HFO refrigerants such as HoneyWell’s new Solstice brand name or DuPont/Chemours’ new Opteon brand name and natural refrigerants, also known as hydrocarbons.
As of now there is no clear winner in this battle. It really depends on where you look. Hydrocarbons are very popular in some parts of the world like Asia and at other points in the world they are practically unheard of. For example, it is rare to find a hydrocarbon application in the United States. It just never caught on here.
If I was to put money on what the majority of the market will look like in another five to ten years I would put everything on HFOs. My reasoning here is that you have to giant conglomerate corporations known as DuPont/Chemours and HoneyWell developing, innovating, and pushing their new HFO brands. These companies are monsters for a reason. Most of the time they get their way. On top of that there is just nothing sexy about hydrocarbons. HFOs are new. HFOs are exciting. New and exciting are what the people want.
Hydrocarbon refrigerants have been around for a long time and I’m sure most of you recognize them right away. Some of the most commonly used hydrocarbon refrigerants are as follows:
- R-290 – Propane
- R-600a Isobutane
- R-1270 Propylene
- R-744 Carbon Dioxide
Hydrocarbons are just as efficient, if not more efficient, than HFC or HCFC refrigerants. They are extremely cheap as well when compared to the newly patented HFO refrigerants such as 1234YF. (1234YF goes for as much as $700 for a ten pound cylinder.) They also have an extremely low global warming potential so there is no risk to the environment when using them.
While all of this sounds good the downside of natural refrigerants are the high risk of flammability. I’m sure that you noticed that one of the refrigerants that I listed above is propane. (R-290) In my opinion it doesn’t get much more flammable than that. Just a few weeks ago there was a story about two men working on a hydrocarbon unit. They were not being careful and ended up causing an explosion that cost both their lives. (You can read the article by clicking here.) This unit contained a mixture of propane and isobutane.
This risk of explosion is what has turned people off from hydrocarbons. Even though they are perfectly safe if handled correctly and maintained correctly there is still that level of fear. People just aren’t comfortable using propane for their primary refrigerant. Think about it. Go up and ask someone on the street if they want to use propane for their air conditioning refrigerant. They’d look at you like you grew a second head.
HFOs are still new. In fact they have only been around for about a decade. The most commonly used HFO today and the one that you most likely heard of is 1234YF. Both HoneyWell and Chemours have their own version of it. See below picture of HoneyWell’s Solstice cylinder:
1234YF is the now the default refrigerant across the European Union and is used by all of the major European car manufacturers such as Volkswagen, BMW, Mercedes, and many others. It has also caught on with the Korean and Japanese car market showing up in Toyota and Honda models. Each year that passes we see more and more 1234YF usage across the world and in the United States’ market.
The 1234YF is accepted widely now. The question is what is next. What will replace R-404A? What will replace R-410A? These questions are still up for debate. There are many alternatives out there today and there are many more being developed. So far there is no perfect cross. There is no telling when that perfect solution arrives but I wouldn’t be surprised if it shows up next year.
As I said above I believe in this battle between the HFOs and the Hydrocarbons that the HFOs will come up on top. They have the bank roll of the mega corporations and they have the appeal of something new. Hydrocarbons will always be here and be with us but at least in the United States I see them taking a back seat to the upcoming dominance of HFOs. All of us will be very familiar with the new Solstice and Opteon brands in the near future.
2017 is going to be an interesting year to say the least. There are all the things I mentioned above to consider and there is also a wildcard that I didn’t mention. That wildcard is Donald Trump. What affect will he have on the United State’s refrigerant industry? He has said again and again that he despises China for their trade war against us. Would that mean that he would put on additional tariffs on Chinese imported refrigerant? Could he raise the cost of R-134a even more?
On the other side of the coin he has said that he wants to get rid of as much regulation as he can and that he doesn’t believe in Climate Change. Could this mean that he will back out of the Kigali agreement? (If that’s even possible.) Could he delay some of the EPA’s actions on HFCs? As I said above, it’s a true wildcard. Time will only tell what will happen.
I hope you enjoyed the article and I hope that you are just as excited for the 2017 year that I am. I feel that this is going to be a big year for me and I hope it is for you too!
Thanks for reading and have a happy new year!