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The implementation of refrigerant quota plan is imminent, and the industry is expected to return to the boom cycle
After adopting quota production, the production of HFCs (third-generation refrigerant hydrofluorocarbons) by enterprises cannot exceed the production quota obtained, which is conducive to resolving the current contradiction of severe overcapacity and optimizing the supply and demand situation. Recently, a senior executive of a listed fluorine chemical company in East China told reporters, "Next year, the company will organize the production and operation of HFCs reasonably based on quota management regulations and market changes
Recently, the Ministry of Ecology and Environment issued the "2024 Total Quota Setting and Allocation Plan for Hydrofluorinated Carbides" (hereinafter referred to as the "Plan"), which specifies the total quota for domestic HFCs production, import, and domestic use next year, as well as the enterprise quota allocation plan.
The reporter noticed that several securities firms have stated in recent research reports that due to factors such as the approaching quota period and the concentrated replenishment of overseas enterprises in the fourth quarter, the prosperity of the refrigerant industry is expected to significantly improve.
How are HFCs quotas set?
HFCs are a powerful greenhouse gas synthesized artificially and are one of the main substitutes for ozone depleting substances (ODS). In 2016, the parties to the Montreal Protocol on Substances that Deplete the Ozone Layer reached the Kigali Amendment, aimed at controlling and reducing the production and use of HFCs. On September 15, 2021, the Kigali Amendment officially entered into force for China, marking a new chapter in China's coordinated response to ozone depletion and climate change.
According to the "Plan", the baseline values for the production and use of HFCs in China are measured in tons of carbon dioxide equivalent (tCO2), which are the average production and use of HFCs in China from 2020 to 2022, plus 65% of the baseline values for the production and use of hydrochlorofluorocarbons (HCFCs). Based on this, the baseline value of HFCs production in China is 1.853 billion tCO2, and the baseline value of HFCs usage is 905 million tCO2 (including import baseline value of 0.05 billion tCO2). According to the baseline value of national HFCs production in 2024, the total HFCs production quota for 2024 is set to 1.853 billion tCO2; The total import quota is 10 million tCO2; The total domestic production quota is 895 million tCO2.
The relevant person in charge of the Department of Atmospheric Environment of the Ministry of Ecology and Environment said recently that, considering that 2024 is a freezing year and there may be market changes in the future, some quotas have not been allocated this time, but the Ministry of Ecology and Environment will carry out secondary allocation in 2024 on the premise of not breaking the total quota of 2024, according to the progress of performance work and the needs of relevant industries, including for increasing the quota distribution and the use of HFCs in key fields such as semiconductors and foam, Fully guarantee the development needs of relevant industries.
At the same time, HFCs production units can apply to the Ministry of Ecology and Environment for adjusting HFCs production quotas and domestic production quotas in accordance with the relevant requirements of the "Regulations on the Management of Ozone Depleting Substances".
What does quota allocation mean for the industry?
For fluorine chemical enterprises, the quota allocation of HFCs determines their future industry status. In order to obtain more quotas, domestic fluorine chemical enterprises generally expand their production capacity during the baseline year. According to authoritative statistics, since 2018, the production capacity of R32, one of the mainstream third-generation refrigerants in China, has increased from 272000 tons to 507000 tons, R125 production capacity has increased from 228000 tons to 300000 tons, and R134a production capacity has increased from 320000 tons to 335000 tons. During the baseline year, the rapid expansion of production capacity has put pressure on the supply of third-generation refrigerants, resulting in continued low prices for refrigerants such as R32, R134a, and R125.
During a recent survey with institutional investors, domestic refrigerant leader Sanmei Co., Ltd. stated that the reduction of HFCs quotas is a long-term process that objectively helps to improve supply and demand relations. In the future, with the cyclical fluctuations of the market, industry production capacity will gradually concentrate on top enterprises, while some small and scattered production capacity will gradually exit.
According to Baichuan Yingfu's monitoring, since the third quarter of this year, driven by factors such as reduced production and inventory reduction by fluorine chemical enterprises, as well as an increase in raw material prices, some third-generation refrigerant prices have significantly rebounded. Among them, the domestic selling price of R32 has increased from 14000 yuan/ton at the end of August to the current 1 650000 yuan/ton, an increase of 18%. Although there has been a slight drop in prices recently, with the support of cost, its overall operation is still relatively stable.
Huatai Securities believes that with the implementation of quota policies next year, the industry's supply will be significantly orderly. Coupled with the support of improved domestic demand for air conditioning, automobiles, refrigerators, and other products, the industry will enter an upward cycle of prosperity.
What are the key points of refrigerant faucet layout?
It is worth noting that fluorine chemical industry leaders such as Juhua Group, Yonghe Group, and Sanmei Group are actively laying out the fourth generation refrigerants and continuously breaking through the industry chain towards the field of high-end fluorinated new materials.
According to the national HFC quota allocation plan, it is expected that the total amount of HFC quotas that the company can obtain will be in the leading position in China, "Juhua Shares said on an investor interaction platform recently. As the only enterprise in China that owns the first to fourth generation series of fluorine refrigerants, the company currently has a total annual refrigerant production capacity of 682300 tons, a third generation refrigerant production capacity of 480700 tons, of which R32 has an annual production capacity of 130000 tons, ranking first in the industry. The company's second-generation refrigerant production capacity also ranks at the forefront of the industry, with an annual production capacity of 170000 tons for R22, ranking second in China. At present, the company has built and operated two sets of fourth generation refrigerant HFOs production units, and the variety and scale of HFOs are in a leading position.
The relevant person in charge of Yonghe Group previously told reporters that the company's refrigerant layout is mainly in Inner Mongolia, with obvious cost advantages. At the same time, the company still competes with other peers in a differentiated manner, with differences in product structure. At present, the pattern of third-generation refrigerants has been formed, and the company's goal is to utilize the unique advantages of the northern region and continuously reduce costs.
It is understood that Yonghe Group has a complete range of third-generation refrigerants and a forward-looking layout of fourth-generation refrigerants. The company's Baotou base plans to construct projects such as 20000 tons/year HFO-1234yf, 23000 tons/year HFO-1234ze co production of HCFO-1233zd, 10000 tons/year perfluorohexane, and 180000 tons/year chloroform. The preliminary approval has been completed.
Recently, the Ministry of Ecology and Environment issued the "2024 Total Quota Setting and Allocation Plan for Hydrofluorinated Carbides" (hereinafter referred to as the "Plan"), which specifies the total quota for domestic HFCs production, import, and domestic use next year, as well as the enterprise quota allocation plan.
The reporter noticed that several securities firms have stated in recent research reports that due to factors such as the approaching quota period and the concentrated replenishment of overseas enterprises in the fourth quarter, the prosperity of the refrigerant industry is expected to significantly improve.
How are HFCs quotas set?
HFCs are a powerful greenhouse gas synthesized artificially and are one of the main substitutes for ozone depleting substances (ODS). In 2016, the parties to the Montreal Protocol on Substances that Deplete the Ozone Layer reached the Kigali Amendment, aimed at controlling and reducing the production and use of HFCs. On September 15, 2021, the Kigali Amendment officially entered into force for China, marking a new chapter in China's coordinated response to ozone depletion and climate change.
According to the "Plan", the baseline values for the production and use of HFCs in China are measured in tons of carbon dioxide equivalent (tCO2), which are the average production and use of HFCs in China from 2020 to 2022, plus 65% of the baseline values for the production and use of hydrochlorofluorocarbons (HCFCs). Based on this, the baseline value of HFCs production in China is 1.853 billion tCO2, and the baseline value of HFCs usage is 905 million tCO2 (including import baseline value of 0.05 billion tCO2). According to the baseline value of national HFCs production in 2024, the total HFCs production quota for 2024 is set to 1.853 billion tCO2; The total import quota is 10 million tCO2; The total domestic production quota is 895 million tCO2.
The relevant person in charge of the Department of Atmospheric Environment of the Ministry of Ecology and Environment said recently that, considering that 2024 is a freezing year and there may be market changes in the future, some quotas have not been allocated this time, but the Ministry of Ecology and Environment will carry out secondary allocation in 2024 on the premise of not breaking the total quota of 2024, according to the progress of performance work and the needs of relevant industries, including for increasing the quota distribution and the use of HFCs in key fields such as semiconductors and foam, Fully guarantee the development needs of relevant industries.
At the same time, HFCs production units can apply to the Ministry of Ecology and Environment for adjusting HFCs production quotas and domestic production quotas in accordance with the relevant requirements of the "Regulations on the Management of Ozone Depleting Substances".
What does quota allocation mean for the industry?
For fluorine chemical enterprises, the quota allocation of HFCs determines their future industry status. In order to obtain more quotas, domestic fluorine chemical enterprises generally expand their production capacity during the baseline year. According to authoritative statistics, since 2018, the production capacity of R32, one of the mainstream third-generation refrigerants in China, has increased from 272000 tons to 507000 tons, R125 production capacity has increased from 228000 tons to 300000 tons, and R134a production capacity has increased from 320000 tons to 335000 tons. During the baseline year, the rapid expansion of production capacity has put pressure on the supply of third-generation refrigerants, resulting in continued low prices for refrigerants such as R32, R134a, and R125.
During a recent survey with institutional investors, domestic refrigerant leader Sanmei Co., Ltd. stated that the reduction of HFCs quotas is a long-term process that objectively helps to improve supply and demand relations. In the future, with the cyclical fluctuations of the market, industry production capacity will gradually concentrate on top enterprises, while some small and scattered production capacity will gradually exit.
According to Baichuan Yingfu's monitoring, since the third quarter of this year, driven by factors such as reduced production and inventory reduction by fluorine chemical enterprises, as well as an increase in raw material prices, some third-generation refrigerant prices have significantly rebounded. Among them, the domestic selling price of R32 has increased from 14000 yuan/ton at the end of August to the current 1 650000 yuan/ton, an increase of 18%. Although there has been a slight drop in prices recently, with the support of cost, its overall operation is still relatively stable.
Huatai Securities believes that with the implementation of quota policies next year, the industry's supply will be significantly orderly. Coupled with the support of improved domestic demand for air conditioning, automobiles, refrigerators, and other products, the industry will enter an upward cycle of prosperity.
What are the key points of refrigerant faucet layout?
It is worth noting that fluorine chemical industry leaders such as Juhua Group, Yonghe Group, and Sanmei Group are actively laying out the fourth generation refrigerants and continuously breaking through the industry chain towards the field of high-end fluorinated new materials.
According to the national HFC quota allocation plan, it is expected that the total amount of HFC quotas that the company can obtain will be in the leading position in China, "Juhua Shares said on an investor interaction platform recently. As the only enterprise in China that owns the first to fourth generation series of fluorine refrigerants, the company currently has a total annual refrigerant production capacity of 682300 tons, a third generation refrigerant production capacity of 480700 tons, of which R32 has an annual production capacity of 130000 tons, ranking first in the industry. The company's second-generation refrigerant production capacity also ranks at the forefront of the industry, with an annual production capacity of 170000 tons for R22, ranking second in China. At present, the company has built and operated two sets of fourth generation refrigerant HFOs production units, and the variety and scale of HFOs are in a leading position.
The relevant person in charge of Yonghe Group previously told reporters that the company's refrigerant layout is mainly in Inner Mongolia, with obvious cost advantages. At the same time, the company still competes with other peers in a differentiated manner, with differences in product structure. At present, the pattern of third-generation refrigerants has been formed, and the company's goal is to utilize the unique advantages of the northern region and continuously reduce costs.
It is understood that Yonghe Group has a complete range of third-generation refrigerants and a forward-looking layout of fourth-generation refrigerants. The company's Baotou base plans to construct projects such as 20000 tons/year HFO-1234yf, 23000 tons/year HFO-1234ze co production of HCFO-1233zd, 10000 tons/year perfluorohexane, and 180000 tons/year chloroform. The preliminary approval has been completed.
Sanmei Group stated that in the field of refrigerants, the company actively promotes the technology, talent reserves, and product research and development of the fourth generation fluorinated refrigerants. The long-term development goal of the company is to become a first-class manufacturer of refrigerants, foaming agents, electronic grade high-purity chemicals, and basic fluorochemicals both domestically and internationally. It is understood that according to the project plan, the 6000 ton/year lithium hexafluorophosphate project is expected to enter trial production in the first quarter of next year, and the 5000 ton/year perfluoroethylene propylene and 5000 ton/year polyvinylidene fluoride projects are expected to enter trial production around December this year.
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