In December 2015, FECO publicly displayed the 2016 list of put-on-file HCFCs distributors, according to which the number of the distributors diminished compared with that in 2015. This reflected that with China's continuous elimination of HCFCs production and consumption, relevant market participants have sped up their pace to withdraw from the market or change their products.

On 4 Dec., 2015, the Foreign Economic Cooperation Office, Ministry of Environmental Protection (FECO) unveiled the 2016 list of put-on-file hydrochloroflurocarbons (HCFCs) distributors.

Accordingly, 83 domestic distributors (vs. 88 in 2015) submitted their sales related materials to FECO. Of this, 25 distributors came from Zhejiang Province, 14 from Guangdong Province, 10 from Jiangsu Province, 7 from Shandong Province, 3 from Liaoning Province, 10 from Shanghai, 4 from Beijing, 3 from Tianjin, 2 from Jiangxi Province and Chongqing Municipality respectively, and 1 from Hebei, Anhui and Sichuan provinces respectively.

According to CCM research, relevant market participants has sped up their pace to withdraw or change their products, as China is continuously eliminating HCFCs production and consumption.

To be specific, 2013-2015 is the first stage that HCFCs was replaced in China's refrigeration & air conditioner industry. As it will be the second stage from 2016, relevant production and consumption will be eliminated even faster.

The overall narrowing market space forces domestic HCFCs distributors to consider their future operation, and product change in particular, should be taken into account first.

This is majorly because that new market vane in the refrigeration & air conditioner industry has been set after FECO released the First Catalogue of Recommended Substitutes for HCFCs (Exposure draft), which reflected the Chinese government’s determination to continuously promote the use of natural refrigerant universally.

The recommended catalogue includes only 1 fluorine-enriched refrigerant, difluoromethane (HFC-32), and the rest are all natural refrigerant such as propane (R290), isobutane (R600a), carbon dioxide (CO2), ammonia (NH3) and cyclopentane.

Substitution work of HCFCs in China

Note: HCFCs stand for hydrochloroflurocarbons;
         Frozen level is the average production and consumption in 2009-2010
Source: Foreign Economic Cooperation Office, Ministry of Environmental Protection & CCM

According to CCM’s communication with industry insiders, domestic HCFCs distributors, faced with product change, will choose hydrofluorocarbons (HFCs) preferentially. However, it is a general trend that natural refrigerants will be increasingly applied in the future. For instance, R290 air conditioner has been launched officially in domestic market in April 2015 and applied gradually in government organisations, colleges and universities, as the Chinese government is constantly promoting it.

This also shows that natural refrigerant has begun to share the market space HCFCs emptied out. From a different perspective, the future market space of HFCs is being occupied, which is vital to the its market participants as the HFCs industry is currently depressed by excess production capacity and its recovery depends on growing demand.

For example, the domestic total capacity of 1,1,1,2-tetrafluoroethane (HFC-134a), a representative in HFCs industry, is about 220,000 t/a whereas the average operating rate is 50% in 2015. Compared to the peak period in 2010-2012, the average operating rate dropped by nearly 30 percentage points and the average ex-works price even plunged by about 300%, according to the CCM's statistics.

Ex-works price of 1,1,1,2-tetrafluoroethane in China, January–November 2015

Source: CCM

About CCM:

CCM is the leading market intelligence provider for China’s agriculture, chemicals, food & ingredients and life science markets. Founded in 2001, CCM offers a range of data and content solutions, from price and trade data to industry newsletters and customized market research reports. Our clients include Monsanto, DuPont, Shell, Bayer, and Syngenta. CCM is a brand of Kcomber Inc. More about CCM, please visit www.cnchemicals.com.

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