Refrigerant price and factors to impact the production cost
Why have the refrigerant price increased so drastically ?!
Many customers have been asking recently why the price of refrigerant has increased so drastically. What happened?! And will the price stay this high for much longer? Today, the admin has the explanation for you as follows:
The refrigerants widely used in Thailand are mostly imported from factories in China, using Hydrofluoric Acid (HF) and Trichloroethylene (TCE) as primary raw materials. Looking at the price graph over the past three months. We can see that the price of HF has increased by approximately 20%. However, we believe that the increase in raw material costs may not be the main factor driving such a rapid price rise.
Beyond the cost of raw materials, another crucial factor is production, which requires electricity and fuel. It’s well-known that China is currently facing an energy crisis due to a shortage of coal used for electricity generation (China relies on coal for 72% of its total energy needs). The price of coal has increased from $100 USD per ton before COVID-19 to $240 USD per ton currently, more than doubling the cost of electricity production in China. This has led to many factories experiencing insufficient electricity supply, losses, and the need to reduce production capacity or even halt operations.
Another significant factor is international and domestic shipping costs. It’s well known that since the beginning of the year. The international shipping has faced challenges including insufficient container supply and significantly increased shipping rates. The Baltic Dry Index (BDI) rose from approximately 1,200 points to a peak of 5,600 points in October 2021. Combined with almost daily increases in oil prices, this has also impacted domestic transportation costs.
And the final factor that cannot be overlooked is the Thai baht exchange rate. It is another important factor for imports. The baht has been continuously weakening, from around 30 baht/USD at the beginning of 2021 to almost 34 baht/USD in early October 2021.
All of the factors mentioned above have a significant impact on the cost and refrigerant price . As can be seen from the graphs showing the rapid price increase of R22 and R134a refrigerants since the end of August 2021, in just over a month. The prices of these two types of refrigerants have increased by 50-70%, and the upward trend is expected to continue.
How long will these refrigerant price stay this high?
Based on the various factors affecting refrigerant prices mentioned above. We believes that refrigerant prices are likely to continue rising within the next 3-6 months until the various crises subside. This is because China and the rest of the world are entering winter at the end of this year. Requiring a massive increase in coal reserves for electricity generation. This will result in a continued energy shortage crisis in China until next year. If this prediction holds true, we will likely not see the low refrigerant prices we have seen in the past again.