Recently, the Ministry of Ecology and Environment of China released the "Total Quota Setting and Allocation Plan for Ozone-Depleting Substances in 2025" and the "Total Quota Setting and Allocation Plan for Hydrofluorocarbons in 2025".

Dongguan Securities research report pointed out that the draft of the 2025 quota setting and allocation plan for third-generation refrigerants maintains policy continuity and stability, considers industry development needs and ensures the security of the industry chain supply chain, and increases the quota for varieties with demand growth.

The production quota for R22 is reduced by 18% in 2025, while the demand for air conditioner aftermarket is expected to remain stable in the short term, which is conducive to the upward trend of R22 prices.

Guotai Junan Securities stated that in the first half of 2024, air conditioner production data exceeded expectations, with more quota usage causing tightness in R32 supply.

This document issuance increases the remaining portion of the production quota for internal use, allowing an increase in the production quota for using R32 within the year to ensure a moderate relaxation of supply and stabilize the pricing and quantity of refrigerants.

Research from Guotai Junan Securities believes that in the initial stage of quota policy implementation, the supply and demand disturbance of third-generation refrigerants, the additional issuance of remaining quotas reflects a strong market demand for third-generation refrigerants, and the additional issuance is to adapt to market demand, optimize resource allocation, and will not fundamentally affect the third-generation refrigerant policy and industry trends in the short term.

Leading refrigerant company:

Dongyue Group (00189): The subsidiary Dongyue Organosilicon Materials has reported a profit, and it is expected that the company's net profit for the first half of the year will be about RMB 62-68 million, a turnaround from a loss of RMB 192 million in the same period last year. This is mainly due to an increase in product output, sales volume and revenue, as well as a decrease in unit production costs and an increase in gross margin. Dongyue Group has the highest global production capacity for R22. In addition, Dongyue Group's refrigerant products include more than 10 varieties such as R32, R125, and R134a, and these varieties have all experienced varying degrees of price increases since the beginning of this year.