20 September 2017
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 | A-Gas Managing Director John Ormerod explains why rises in the cost of refrigerants are happening and how they are changing the market. The price of refrigerants has been rising steeply this summer as the F-Gas Regulations tighten their grip on an industry adapting to change. The higher GWP refrigerants are taking a hit as the availability of some gases is reduced and engineers and end users make the switch to low GWP alternatives. |
According to Okorecherche, the research group used by the European Commission to monitor refrigerant prices under the F-Gas Regulations, the producer selling price of the industry’s go-to gas R404A – the highest GWP option – has increased by as much as 500 per cent in the last three years.
This has been reflected by large price increases for customers in the UK. The figures also reveal that the producer selling prices of R134a, a gas commonly used in air conditioning, have risen by more than 200 per cent. The prices of other popular HFC-based refrigerants have also risen significantly.
Broadly speaking I expect these rises to continue. Supply and demand is coming into play and those who are desperate to get their hands on high GWP gases are willing to pay more. What we have started to see is the price of refrigerants starting to align with the GWP rating of the product. That’s because the overall quota system is capped on a CO2 equivalent which ensures that the GWP value comes into play. R404A, for instance, has a GWP (or CO2 equivalent) of approximately three times that of newer generation refrigerants for the same application. As the market availability is capped by CO2 equivalent, then under normal economic theory we could expect to see R404A reach three times the price of the newer generation products – perhaps more if shortages occur.
Balance
For a long time the price of R404A was not markedly any different to that of the lower GWP alternatives but towards the end of last year, and certainly this year, that changed significantly. The price of R404A is reflecting a shift in market patterns as the new low GWP refrigerants come to the fore.
We have not seen shortages yet but it is evident that the supply and demand balance is much tighter this year. There is little surplus refrigerant on the market which you would ordinarily expect would keep prices suppressed. This year may not have been a step down year quota wise but imports of pre-charged equipment have started to come under the regulations and this has had an influence on supply.
Pricing will more and more be driven by market behaviour and I predict that the newer generation low GWP gases will become more cost effective in comparison to the older generation refrigerants. This is another factor which will focus the minds of contractors and end users, and in turn drive people towards converting to low GWP gases.
Frequent spells of hot weather have provided the industry with a tonic this summer. Hard-working refrigeration cabinets in supermarkets and stores have had to up their game to handle the rising temperatures. Much-needed air conditioning systems in commercial buildings have also been working hard as temperatures have topped the 30°C mark. This means that engineers have also been working overtime to keep the systems up and running.
Opportunity
I have seen pictures of supermarket cases out of commission in instances where the higher temperatures have caught the end user on the hop. Sales wise we have had some very good weeks when the weather was warm but I shall wait until we are into the autumn before passing judgment on whether we have had a good summer for the industry.
In this respect a more effective maintenance regime will ensure that these breakdowns do not happen in future but don’t forget these windows do provide the installer with an opportunity to review refrigerant use and make the switch to a low GWP alternative if necessary.
Brexit and how it will affect our industry is still very much a case of wait and see. How we leave the European regulatory framework and impose our own UK regulation regime is still up in the air. I suspect that the F-Gas Regulations will continue to loom large in our lives and the only question that will have to be answered is how the quota system will be managed away from the European Commission. It will be a number of months before we start to see what will emerge from the negotiations on this.
Within the European framework some countries like those in Scandinavia have chosen to go beyond the F-Gas Regulations and impose more stringent step downs but generally speaking most across Europe have remained in line with each other. I do not see this changing.
www.agas.com
This has been reflected by large price increases for customers in the UK. The figures also reveal that the producer selling prices of R134a, a gas commonly used in air conditioning, have risen by more than 200 per cent. The prices of other popular HFC-based refrigerants have also risen significantly.
Broadly speaking I expect these rises to continue. Supply and demand is coming into play and those who are desperate to get their hands on high GWP gases are willing to pay more. What we have started to see is the price of refrigerants starting to align with the GWP rating of the product. That’s because the overall quota system is capped on a CO2 equivalent which ensures that the GWP value comes into play. R404A, for instance, has a GWP (or CO2 equivalent) of approximately three times that of newer generation refrigerants for the same application. As the market availability is capped by CO2 equivalent, then under normal economic theory we could expect to see R404A reach three times the price of the newer generation products – perhaps more if shortages occur.
Balance
For a long time the price of R404A was not markedly any different to that of the lower GWP alternatives but towards the end of last year, and certainly this year, that changed significantly. The price of R404A is reflecting a shift in market patterns as the new low GWP refrigerants come to the fore.
We have not seen shortages yet but it is evident that the supply and demand balance is much tighter this year. There is little surplus refrigerant on the market which you would ordinarily expect would keep prices suppressed. This year may not have been a step down year quota wise but imports of pre-charged equipment have started to come under the regulations and this has had an influence on supply.
Pricing will more and more be driven by market behaviour and I predict that the newer generation low GWP gases will become more cost effective in comparison to the older generation refrigerants. This is another factor which will focus the minds of contractors and end users, and in turn drive people towards converting to low GWP gases.
Frequent spells of hot weather have provided the industry with a tonic this summer. Hard-working refrigeration cabinets in supermarkets and stores have had to up their game to handle the rising temperatures. Much-needed air conditioning systems in commercial buildings have also been working hard as temperatures have topped the 30°C mark. This means that engineers have also been working overtime to keep the systems up and running.
Opportunity
I have seen pictures of supermarket cases out of commission in instances where the higher temperatures have caught the end user on the hop. Sales wise we have had some very good weeks when the weather was warm but I shall wait until we are into the autumn before passing judgment on whether we have had a good summer for the industry.
In this respect a more effective maintenance regime will ensure that these breakdowns do not happen in future but don’t forget these windows do provide the installer with an opportunity to review refrigerant use and make the switch to a low GWP alternative if necessary.
Brexit and how it will affect our industry is still very much a case of wait and see. How we leave the European regulatory framework and impose our own UK regulation regime is still up in the air. I suspect that the F-Gas Regulations will continue to loom large in our lives and the only question that will have to be answered is how the quota system will be managed away from the European Commission. It will be a number of months before we start to see what will emerge from the negotiations on this.
Within the European framework some countries like those in Scandinavia have chosen to go beyond the F-Gas Regulations and impose more stringent step downs but generally speaking most across Europe have remained in line with each other. I do not see this changing.
www.agas.com
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