The tightening of refrigerant quota constraints is a long-term trend direction. Against this backdrop, the bullish outlook for second and third generation refrigerants such as R22, R32, R125, and R134a is expected to continue, with significant long-term upside potential for product prices.
According to Guosen's research report, the Zhito Finance APP learned that according to the home air conditioner production report from Industry Online, domestic sales production of home air conditioners in December 2024 is expected to reach 7.022 million units, a 15.0% increase compared to the same period last year. Exports of home air conditioners in December 2024 are projected to be 10.88 million units, up 48.5% year-on-year. The demand side this year is stimulated by the trade-in policy, local high temperatures, inventory replenishment in Europe and the USA, and growth in demand from emerging markets in Southeast Asia, leading to a significant increase in both domestic and foreign air conditioner production and output. In the future, tightening refrigerant quota constraints will be a long-term trend direction, and under this context, the bullish outlook for second and third generation refrigerants such as R22, R32, R125, and R134a is expected to continue, with significant long-term upside potential for product prices.
Guosen Securities' main points are as follows:
Review of the fluorochemical market in November
As of November 29, the market quote for R22 is reported at 31,000-32,000 yuan/ton; R125 at 39,000-40,000 yuan/ton; R134a at around 39,000-40,000 yuan/ton; and R32 at a retail quote of 39,000-40,000 yuan/ton. Although R22's quota will significantly shrink next year, downstream demand is gradually being replaced by R32, leading enterprises to focus on inventory accumulation while waiting for explosive growth after the mismatch due to reduced supply next year; R125 production cuts have occurred, and there is insufficient domestic trade quota remaining, leading to a tight supply of R410a and consequently higher product prices; the factory quote for R134a has increased to 42,000 yuan/ton, with transactions in the circulation market gradually being finalized; R32 products are primarily sold by air conditioning companies, and retail quotes have gradually risen to 42,000 yuan/ton.
The factory quotes for R404 and R507 continue to rise, with current enterprise quotes increasing to 41,000 yuan/ton, and there is intent to continue raising prices. After a short period of stagnation, prices are expected to gradually rise at the end of the year against the backdrop of significant upcoming production cuts by enterprises. In the foreign trade market, the recent overall performance of the foreign trade markets for R22, R32, and R134a has been good, and the price gap between 'domestic-export' for R22, R32, and R134a has noticeably narrowed. According to Fluor Products Online, the export price of R32 has risen to 39,000-40,000 yuan/ton, which is now on par with the domestic price.
The Ministry of Ecology and Environment released the refrigerant quota allocation plan for 2025, with compliance reductions for second generation refrigerants and an increase of 0.045 million tons for the third generation refrigerant R32.
On October 18, 2024, the Ministry of Ecology and Environment issued a notice regarding the 'Notification on the Issuance of the total set and distribution plan for the consumption of ozone-depleting substances and hydrofluorocarbons in 2025,' preparing the '2025 Annual Allocation Plan for Consumption of Ozone-Depleting Substances' and the '2025 Hydrofluorocarbon Allocation Plan.' Compared with the draft for comments released in September, the reduction plan for the second-generation refrigerants is consistent with the draft for comments, while some individual varieties of third-generation refrigerants differ slightly. Among them, the second-generation refrigerants will implement annual compliance elimination tasks, reducing production and usage levels by 67.5% and 73.2% of the baseline values respectively.
In terms of segmented products, compared with 2024, the production quota/internal consumption quota of R22 was reduced by 18%/28%; the production quota/internal consumption quota of R141b was reduced by 57%/68%, R142b production quota/internal consumption quota was reduced by 64%/79%, R123 production quota was reduced by 21%, R124 production quota/internal consumption quota was reduced by 19%/28%, and the production quota of each enterprise will be proportionally reduced.
The total amount control target for third-generation refrigerant production and use is maintained at the baseline value, with the total production quota for 2024 being 1.853 billion tons of CO2, the total internal consumption production quota being 0.895 billion tons of CO2, and the total import quota being 0.01 billion tons of CO2. In specific segmented categories, based on the supply and demand situation in 2024, an additional issuance of 0.045 million tons of R32, 8000 tons of R245fa, and 50 tons of R236ea is planned, in line with the consultation draft. The R41 production quota has been changed to issue an additional 50 tons, 30 tons more than the consultation draft, mainly reflected in the export quota.
The air conditioner production data in the first half of 2024 performed brilliantly, with production planning for domestic and foreign sales in the fourth quarter maintaining double-digit high growth, indicating that the household air conditioner industry has entered a new cycle.
In 2024, despite the real estate market remaining sluggish and the retail market consumption for air conditioners at the completion stage not fully rebounding; the national policy level has proposed a series of measures to promote economic growth (such as home appliance recycling, trade-ins, consumer subsidies, and easing purchase restrictions), which bring significant bullish effects to the home appliance industry (such as white goods air conditioners).
In the fourth quarter, based on production planning data, domestic sales of household air conditioners entered the final sprint stage of the year, experiencing a recovery compared to the previous peak season where high inventory pressures and weak terminal demand persisted. The singles' day sales promotions combined with national subsidies will lead brands into the final push; the overseas market in the fourth quarter is entering a stocking phase, with the increase in export production hitting new highs due to ongoing restocking demands from europe and usa, lowered interest rates stimulating consumption in the usa, and hot summer in europe creating strong air conditioner stocking demand. Furthermore, the rapid growth of emerging markets, especially in Southeast Asia and Latin America, will also provide new growth points for china's air conditioner exports.
According to data from the National Bureau of Statistics, in October 2024, the air conditioner production in china reached 16.2 million units, an increase of 18.00% year-on-year; the cumulative production from January to October was 188.49 million units, a year-on-year increase of 6.52%. According to the industry online, in October 2024, the sales of household air conditioners reached 12.869 million units, a year-on-year increase of 37.9%, of which domestic sales were 6.289 million units, a year-on-year increase of 24.1%, and exports were 6.58 million units, a year-on-year increase of 54.3%. According to the production planning report for household air conditioners, in December 2024, domestic production planning for household air conditioners is set at 7.022 million units, an increase of 15.0% compared to the same period last year. In December 2024, export production planning for household air conditioners is 10.88 million units, a year-on-year increase of 48.5%.
This month's news in the fluorochemical industry.
Inner Mongolia Yinghe Mining Resources Co., Ltd. fully acquired Kalqin Banner Penglong Mining Co., Ltd., expecting to add an annual production capacity of 0.25-0.3 million tons of fluorite concentrate. Hubei Xingfa Chemicals Group won a bid of 0.2 billion yuan for a resource volume of 1.8 million tons of fluorite mine. The team led by Kang Yanbiao from the University of Science and Technology of China has made a breakthrough in the low-temperature efficient degradation of PFAS, while Véronique Gouverneur's research group at Oxford University has reported a method for directly preparing fluorinated compounds from fluorite.
Investment advice
In 2025, the quota scheme for refrigerants will be issued on the supply side, accelerating the compliance reduction of second-generation refrigerants, with a year-on-year increase of 0.045 million tons for the third-generation refrigerant R32. The industry concentration is high for varieties such as R22 and R32. On the demand side, this year has seen significant boosts in air conditioner production and shipment due to factors such as the trade-in policy, high temperatures in some regions, restocking in Europe and the USA, and growing demand in emerging regions like Southeast Asia. Supply of second-generation refrigerants like R22 is rapidly contracting, supported by the air conditioner repair market, leading to a tight supply-demand situation. Supply of the third-generation refrigerant R32 has slightly increased year-on-year, but demand is also growing rapidly, indicating that the supply-demand balance will remain tight.
Related symbols
Guosen believes that the tightening of refrigerant quotas is a long-term trend. Against this backdrop, there is a bullish outlook for the continued prosperity of second and third-generation refrigerants such as R22, R32, R125, and R134a, suggesting that product prices still have considerable long-term upward potential. Leading companies in the second and third-generation refrigerant quota space are expected to maintain high profitability levels in the long run. It is recommended to focus on fluorochemical leaders with complete industry chains, comprehensive infrastructure, leading refrigerant quotas, and advanced technological processes. Relevant symbols include Zhejiang Juhua (600160.SH), Zhejiang Sanmei Chemical Industry (603379.SH), Haohua Chemical Science& Technology Corp. (600378.SH), and china kings resources group (603505.SH).
Risk warning: lower-than-expected demand for fluorine chemical products; policy risks (tightening of environmental policies on fluorinated refrigerants, accelerated upgrading and replacement processes, changes in quota allocation policies); global trade frictions and export restrictions; sluggish real estate cycle; delays in project commissioning for various companies; rising raw material prices; risks in chemical safety production, etc.
