Understanding Refrigerant Pricing

This will be a short post but I had it bouncing around in my head for a few days and I wanted to share it with my audience. One of the most common questions I get asked over and over again is about refrigerant pricing. This could be posed from a home-owner who doesn’t know what the fair price of refrigerant is per pound or from the contractor who wants to know why he’s paying double the cost for 410A then he paid last month. How do refrigerants get their price, what all goes into it, and why does it change so often?

Well folks, there isn’t an easy answer to this and it’s probably why so many people ask about it. I like to think of refrigerant as a commodity. When I explain this to people I equate it to a barrel of oil. You always hear on the news about the cost of a fifty-five gallon barrel of oil. It’s XX amount today then ten dollars higher the next day. Next week it may have gone down thirty dollars from that price. Refrigerant can be treated the same way. Sure, it’s not as volatile as oil but if you are in the dead heat of an intense summer than the price on a 410A or 134a cylinder can go through the roof. Or, if the summer across the country only comes up with a few hot days then you could see the price plummet.

The following are some of the things that I have seen affect refrigerant pricing through my years in the industry:

  • Shortage of raw materials – This happened in 2017 when we ran into a shortage of the mineral flurospar in China. Flurospar is a key ingredient to hydrofluroic acid, Hydrofluroic acid is a key component to the R-125 refrigerant, and R-125 refrigerant is a key component to R-410A. See this snowball rolling? The price nearly doubled this year all because of the shortage of this mineral that no one even saw coming. The cause of this shortage related back to China tightening it’s environmental and mining polices and of course China controls nearly all of this resource for the entire world.
  • Anti-Dumping and Tariffs Lawsuits – These have been all over the place over the years. The worst part about them is that I’ve seen a refrigerant rise twenty to thirty percent just at the filing of such a lawsuit with the Trade Commission. So, nothing has happened yet but just the whisperings of a potential new tariff caused the price to sky rocket. That’s not to mention the effects that can happen if a tariff is activated on a refrigerant.
  • An Unusual Summer – This could be taken either way. A very hot or a very mild summer. Obviously, with a hot summer you have more machines working hard and more machines breaking which means more refrigerant needed. If you get a brutal summer with day after day of one-hundred degree days you can see the price rise and rise. I remember one summer where I saw the price start at sixty-five dollars a cylinder and end at two-hundred and forty a cylinder. No joke. The price leveled out again as we went toward winter but that just goes to show you how fast the price can change.
  • Phase Outs – We’ve all seen this over the years. Phase outs cause the refrigerant market to go hay-wire and sometimes it’s not just the pricing on the phased out refrigerant that goes up. Just look at the price of R-22 over the past five to ten years. It just keeps going up. I bet you here in a few years it will be around eight to nine-hundred dollars a cylinder.
  • Threat of Phase Out – This one is a little different but I have seen the price go up substantially just at the threat of a phase out or at the announcement of a planned phase out that won’t start until five or ten years down the road.
  • Distributor Competition – This is somewhat related to the tariff or anti-dumping point I made above. This is when you have a refrigerant distributor buying trailerloads or containers of refrigerant from China and unloading it at dirt cheap prices in your marketplace. Sometimes these guys can buy thirty to forty percent less than what an American made product will go for. They then give it away to their customers which causes the competing distributors to lower their price causing a chain reaction of lower cost. This doesn’t happen as much anymore due to the tariffs on refrigerant blends as well as R-134a.
  • Contractor/Mechanic Competition – I saw this more on the automotive side but some dealerships would buy ten to twenty pallets of R-134a in the dead of winter and sit on it until spring and summer came around. Then when the prices started to rise they would keep their prices level all the while still making a hefty profit. This would cause their competitors to lower their cost causing the market to go down as well.

Now the above notes are just some of the things that can happen to each refrigerant on the market during the summer season. To complicate this more imagine when you have each one of these points mixing and matching with each other all during the same summer season. Sure, you can be educated as to what’s coming down the path but a lot of it is a guessing game.

I’ve said it before and I’ll say it again. The safest time to buy refrigerant is December, January, and February. The cost has had time to cool off from the summer and has started to level out to it’s lowest point. If you wait any longer then February you are going to start seeing it creep up again as March hits and the south starts to warm up. Most guys who have the capital will buy what they need for the entire season during these months. This allows them to be competitive and also takes away any worry about what will happen to the price in the summer.

I hope this was helpful and thanks for reading,

Alec Johnson

RefrigerantHQ

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