Refrigerant firms in bid to prompt customer change
Thursday, April 20, 2017
I have written here before about the way the F-Gas regulations in Europe were revised in such a way as to drive uptake of lower-GWP refrigerants, with their combination of production quotas and use bans. I have also written here before about the warnings from those familiar with the supply process.
They cautioned that there would come a "cliff" in 2018 where the HFC quotas would drop significantly thanks to an anomaly in the calculations of demand — and that this could cause problems for unwary end users in getting their hands on the higher-GWP gases. The message I reported was "convert away from the likes of R404A as soon as possible to avoid a demand squeeze."
Well, it is with a certain sense of inevitably that I have to report that the end-users and operators of refrigeration systems have not been proactive in making these moves away from R404.
In fact, while these warnings were aimed at those with existing estates running on the high-GWP refrigerant, there have actually been reports in the UK of equipment manufacturers still continuing to offer new R404A equipment for installation. With a ban on servicing equipment that uses the higher-GWP refrigerants coming in 2020, it doesn't give the poor customer of that equipment much of a chance.
In the context of this general apathy from the customer base — whether through ignorance of the issues, a lack of available investment funds, or a general complacency about the force of European legislation — the last few weeks have proved interesting.
At the end of March, we held a roundtable on the future of HFOs that was attended by delegates representing a veritable cross section of the refrigerant supply chain — from refrigerant manufacturer to distributor and wholesaler and all the way to supermarket end-users. The debate, which was convened ostensibly to assess the current state of readiness for the new refrigerants was notable for the increased sense of urgency among the supply side.
Whereas previously, the refrigerant suppliers had referred to a "cliff" in quota reduction, there was now talk of an "abyss." Switching the metaphor slightly, there were stark warnings of a tsunami of price and availability issues in the market, as manufacturers sought to manage supply and demand.
As people said at that debate, the refrigeration industry has been in similar situations before where the commonly used refrigerant is phased out or down — most recently with R22 in Europe — but never at the speed that is now being required with R404A and R507. I will admit that I had no idea when I heard these latest warnings that the "tsunami" was heading so quickly to shore.
Fast forward a couple of short weeks, and we are in a situation where two of the "Big Four" refrigerant manufacturers in Europe have served to drive their customers toward change by applying a twist of the screw to the market.
Chemours has gone down the "conventional" route of managing demand by raising prices — very significantly. In fact, for the highest-GWP refrigerants, the manufacturer is hiking them by 30 percent from May 1, on the back of two increases since January, each of 20-25 percent.
Meanwhile, Honeywell has taken an even more radical step to get the customers to focus by serving notice that it is shutting off R404A supply into the EU entirely next year.
These actions, it seems to me are the sign of refrigerant manufacturers who have given up waiting for their customers to drift toward the correct solution. Instead, they have taken matters into their own hands.
Honeywell should be be applauded for taking such a lead, since there is always the risk in making a bold move like this that none of its rivals will follow suit — and instead sweep up all the customers who want R404A. But now we should fully expect other refrigerant manufacturers to follow suit, because it won't be in their interest to use up their future quotas — which are GWP weighted — on high-GWP gases with a limited shelf life.
To me, this creates a fascinating precedent for folks across the Atlantic — who will shortly have their own high-GWP refrigerant phasedowns to face. Will the refrigerant suppliers learn from their European experience and take bolder steps earlier next time?
It remains to be seen how these latest moves will be embraced by the cooling industry. The delegates to our roundtable were in no doubt that the prospect of empty shelves and spiraling costs on R404A and R507 was real for European customers — and that was before the moves by Chemours and Honeywell.
The message for end users and their contractors is surely clear: Plans must be made to convert away from R404A and R507 now. Only brave end users would put their heads in the sand and decide to do nothing in the midst of a market developing in this way.
I have warned UK industry readers that if they delay on converting to lower-GWP, they will be facing at best an increased refrigerant bill, and at worst the prospect of having to put members of staff on phone duties in the quest for available refrigerant. And after that, the next level of hell could be finding available engineers to do the conversion, if everyone wants to do it at once.
These are challenging times for the cooling industry in Europe — and with the first-ever refrigerant service ban arriving in under three years, things are only going to get more interesting.
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