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A Look Back at R-22 through the summer

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A Look Back at R-22 through the summer

The article below appeared at the beginning of the 2015 summer. It is interesting that many of the things mentioned began to occur as the summer wore on, with one significant exception…in spite of the fact that production of R-22 was cut by 57%, equal to 29,000,000 pounds of less refrigerant being available, no significant shortages of product occurred.

That is the very reason I am sharing the article with you now as we are near the end of summer. With production down by over 50%, and demand running near normal over the summer, shortages should have occurred. However, the fact that they didn’t indicates inventory that was purchased in the past at lower cost and stockpiled was being introduced into the market as summer progressed. While that helped meet demand, it might be interesting to go back and look at your purchases of R-22 to see if what you paid for R-22 decreased in 2015. I say that simply because we all know that R-22 has done nothing but increase in cost the last couple of years. So, while demand was able to be met this summer, it is entirely likely that higher distributor margins were made on some of the older and lower cost inventory of R-22 released and sold at market pricing…precariously close to “taking advantage of a situation”.

Regardless, industry experts are now pointing at next summer as the time that R-22 availability shortages will begin to appear. The article below supports this belief, but the larger issue is that contractors and property managers who proactively make the change to alternative refrigerants will be the ones who avoid the higher costs and limited availability of R-22 as we move ever closer to 2020.

I hope you will find the article below informative in planning for the future in regard to how best to manage the transition away from R-22. Refrigerant Solutions, Inc. is uniquely qualified to help you proactively begin this process, as we offer R-421a as an alternative to R-22. The only two blend alternative refrigerant available today contains no propane or butane, matches the pressures and temperatures of R-22 almost exactly, is not flammable, is environmentally green, has a refrigerant glide of less than 3%, contains a performance enhancing lubricant, requires no change of oil and works with AB, mineral or POE oils, and requires no major system modifications for retrofitting. Quite simply, it has the closest operating characteristics and system performance to that of R-22 than any other alternative refrigerant.

In addition, we are a full service reclamation service for recovered refrigerants, and offer free recovery canisters, free pickup and delivery of new or filled canisters, disposal of mixed or burned refrigerants, and EPA compliant record keeping. All of these services are provided with no upfront costs, no monthly fees, and no contractual obligations. In addition, any R-22 that is recovered and can be reclaimed back to ARI-700-93 standards of 99.5% purity can be returned to the recovering contractor or property management company at a cost far below current market costs of R-22.

We are a refrigerant “solutions company”, and look forward to hearing from you soon.

Bill White

 

Manufacturers Assess Summer R-22 Supplies (Adapted by Bill White, Refrigerant Solutions, Inc.)

Weather, Demand Could Alter Stability, Price, and Availability

The U.S. Environmental Protection Agency (EPA) mandates that R-22 supplies will be cut by 57 percent in 2015 — the largest one-year drop during the entire phase out. (Graph courtesy of ICOR Intl.)

The mandated industry cutbacks in R-22 production, as regulated by the U.S. Environmental Protection Agency (EPA) in its Oct. 17, 2014, Adjustment of Allowances, resulted in a 57 percent cutback in 2015 production of the hydrochlorofluorocarbon (HCFC), as compared to 2014, with subsequent reductions through 2019, which is the last year production will be allowed in the U.S. The effect of such a significant cutback in 2015 remains to be seen, but it will play out over the next several months.

Questions Remain

There are a number of unknowns headed into the summer of 2015, not the least of which is how much R-22 is out there and how much demand will be created by this summer’s weather. Demand for R-22 in the first quarter has been steady and is following a fairly typical pattern as peak cooling season arrives, said Kenneth Gaglione, director, product marketing, aftermarket refrigerants, Honeywell Intl. Inc., adding the weather will play a critical role in estimating future R-22 demand.

“After a cooler-than-normal 2014 season, some forecasts indicate warm weather from Canada, and the plains will flow into the Northeast this year to produce 10 more days above 90°F compared to last year,” he said. “There also seems to be no relief in sight to the historic drought in California, and the Midwest could see above-average temperatures.”

Overall, increased temperatures this summer could produce a corresponding increase in demand for R-22. Gaglione said he expects sufficient channel inventory to meet this demand early in the season, but inventories will decline as new supplies are limited by EPA-mandated production limits and the effect stockpiling will have on availability.

“Higher-than-average temperatures or humidity could accelerate perceived market tightness,” he said.

“Many contractors are seeking information on alternatives, such as R-422D, so they have options should the warmer-than-average summer forecast create a spike in demand for R-22.”

Supplies of R-22 are ample — at least right now — because of past inventory balances as well as manufacturers’ allocations, said Jay Kestenbaum, senior vice president, sales and purchasing, Airgas Inc. “There does not appear to be excess material being offered by any of the producers above the amounts set aside and allocated for each customer. The fact that there does not appear to be any significant reduction in demand means wholesalers and other suppliers will no doubt need to take product from built-up inventory to supply the market demand expected for this year. Demand in 2015 will clearly be greater than the amounts allocated for total production in the U.S.

“Several price changes issued by all the manufacturers over the past few months have led to increased prices, and there is no reason to expect that prices will not continue to keep rising as supplies continue to tighten over the season and in the next several years of final production,” he added.

According to Kestenbaum, it’s important to note that current prices are still considerably below the market prices of early 2013, when prices were $400-$500 per 30-pound cylinder for quantity sales until the EPA suddenly expanded supply allowances, causing a severe drop in pricing. The difference now is that the total allowances for 2015 are a mere 22 million pounds, down 65 percent from the 63 million in 2013, and there is little time left to the mandated 2020 end of production.

“Users must plan their needs carefully or adapt to new alternatives and take advantage of recovery and reclamation options to provide for the remaining product needed,” he said.

Carl Grolle, owner and president, Golden Refrigerant, said supplies and prices of R-22 this summer are a bit of a mystery because no one is really sure how much R-22 exists. He noted there is no central reserve of the refrigerant and no requirement for suppliers to report how much they have stockpiled.

“It’s like drinking out of a straw when you don’t know how much is left in the cup,” Grolle said. “All you know is that, as long as you pull on it, there’s something there, and right now there’s something there.”

Grolle said he suspects many refrigerant suppliers are not too concerned about selling their R-22 at the moment because, judging from current prices, supply is exceeding — or at least equaling — demand.

“It’s really a classic supply-and-demand scenario,” he said. “I think a lot of people are sitting back thinking the price will go up, and they’re not all that worried about selling it right now. Good things happen to those who wait. We’re not looking to make a killing, but we also know we cannot just go out and buy more R-22 to replenish our stock. We’ve invested in this refrigerant, and I don’t think people are really excited about moving it at the current price. I know I’m not ready to rush in and force the price down when we suspect more demand is right around the corner with the first couple of heatwaves this summer.”

In the long term, demand exceeding supply and the consequent higher prices are inevitable, he added, but, “We just don’t know what that timetable looks like.”

Joyce Wallace, refrigerants business and marketing manager, DuPont Chemicals & Fluoroproducts, agrees that uncertainty rules the day when it comes to the R-22 supply in the 2015 cooling season.

“This year, there will be 57 percent less R-22 produced in the U.S., and, although prices are higher than last year, R-22 demand is expected to be strong,” she said. “With only 22 million pounds of production available this year and demand estimated at more than 55 million pounds, inventories will start to deplete.”

Wallace noted there are only five cooling seasons remaining before the complete R-22 phaseout in 2020, so the importance of having a refrigerant management plan is growing exponentially.

Gordon McKinney, vice president and COO, ICOR Intl., agreed that, although no one knows for sure how much R-22 is still left in the pipeline, with only 22 million pounds allocated for 2015 and annual demand estimates ranging 75-90 million pounds, it’s safe to assume R-22 inventories will begin to wane soon.

He pointed out, however, that R-22 users should not proceed with the goal of completely ridding themselves of R-22 in 2015; rather, the goal should be to mitigate the expense of using up all of their R-22 in a rapid fashion.

“By implementing R-22 alternative refrigerants into their service plans, users can conserve their R-22 allocations for critical applications,” McKinney said. “For example, if a system only has a minor leak, then it makes sense to top that system off with R-22 and move on to the next call. However, if you’re installing a dry-charge R-22 system, a system has leaked its entire charge, or you’re bringing a system down for major repair, then that represents a preferred time to convert the system to an alternative.”

He noted this same strategy was used by the refrigeration sector during the phaseout of chlorofluorocarbons (CFCs), and it proved to be very effective.

“Like the CFC phaseout, reclaimed refrigerant will help close some of the supply-demand gap for R-22, but it will be secondary to the role of the alternative refrigerants and equipment replacement,” McKinney said.

Glenn Haun, director of sales, North America, Arkema Inc., said the company is still confident that, between the inventory that’s in the pipeline and the allowances that have been granted by the EPA, there is an adequate amount of R-22 available to service the U.S.’s needs for years to come. How many years, however, is a question mark.

“That depends on a number of variables, including what the true demand is, what the conversion rate is to either changing out equipment or switching to other refrigerants, fixing equipment leaks, and so on,” Haun said.

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