First published in Frozen & Refrigerated Buyer Magazine November 2015
EPA’s determination means a lot less virgin refrigerant will be available. But nobody knows how much R-22 has been stockpiled, or what will happen to pricing.
A few weeks ago, the EPA issued its final determination on the amount of virgin R-22 allowed to be produced and/or imported in the United States from 2015 through the end of 2019. This determination is what everyone with an interest in refrigerants has been waiting for. Chemical manufacturers, refrigerant reclaimers, and refrigerant end-users had been metaphorically holding their breath until this EPA rule was issued. Those who weren’t holding their breath were sighing and saying “Just tell us what’s going to happen already.”
So now we know.
HALF AS MUCH R-22
There is going to be less R-22 than there could have been. In fact, the EPA is allowing only half as much R-22 as it could have allowed in 2015 and then decreasing linearly the amount it will allow every year from that lower starting point.
Evidently, the EPA feels that there is too much R-22 on the market. In order for the R-22 phaseout to work the way it should in theory, the price of virgin R-22 needs to start rising. Those with equipment that leaks a lot of R-22 will find it cheaper to retrofit that equipment to use a different refrigerant, or to replace the old equipment with new. Those with R-22 equipment that is leak-free can continue to use R-22 into eternity, as long as that equipment stays leak-free. People who don’t have to purchase R-22 for leak replacement don’t care how high the price goes.
Until that equipment leaks, that is.
What’s unknown is the amount of R-22 that commercial refrigeration and industrial refrigeration end-users have stockpiled. Will they keep that refrigerant for their own use, or eventually sell it back into the market after reclamation? There is no doubt that some supermarket companies have a lot of R-22 stockpiled. The EPA doesn’t know how much. The EPA has a general idea of how much is in banks with reclaimers, and they have information on how much has been sent to reclaim-ers over the past years, but they don’t have much of an idea of how much unreclaimed used refrigerant from end-users’ own systems is being stored out there.
Short of commanding every commercial and industrial R-22 end-user to provide data on the amount of R-22 they are stockpiling, the EPA has no way of figuring out that number. And that number is the key to the R-22 phaseout working the way it’s supposed to. The EPA asked some supermarkets to voluntarily divulge how much they were storing, but who knows whether supermarkets told the truth, and who knows whether those supermarkets were representative of the industry. If you knew that EPA was asking you to tell them how much R-22 you had, so that they could accurately cut R-22 production to force prices higher, would you be open and honest with that information?
A VOLATILE MARKET
Imagine a scenario where R-22 prices go up, and then down again a few months later because a few supermarkets have each reclaimed and sold 30,000 pounds of R-22 into the market. And then the price goes up again, and then it goes down again. A market like that would be very volatile, with end-users having no clue whether to buy or sell refrigerant at any point in time.
I have no idea whether that is going to happen. But if I expected to still be an R-22 end-user over the next few years, I’d certainly be sure that I had my own stockpile that met all of my own R-22 needs. That way, I’d be able to thumb my nose at anything that happens with R-22 availability and pricing in the future. At least I’d have certainty. And that is worth a whole lot.