CCM: Impacts brought by illegal R22 production in Chinese market 09-01-2016

In 2015, production quota for R22 used as refrigerant is furthered reduced, causing decline in supply and driving up the market. However, illegal production appears in the industry. Without strengthened supervision, the interests of qualified enterprises will be encroached on and the substitution for R22 used as refrigerant will be drawn back.


Source: Internet

In 2015, the production quota for difluorochloromethane (R22, used as refrigerant, similarly hereinafter) is further reduced to 274,279 tonnes, indicating a supply shortage. This will promote the development and popularization of substitutes for R22. 


However, the substitution for R22 is found to be insufficient.


Immature application technology for difluoromethane (R32) fixed-frequency air conditioners;

Propane (R290) air conditioner not accepted by Chinese market due to safety risk and high price;

R410a (a 1:1 mixture of R32 and pentafluoroethane – R125) variable-frequency air conditioner under expansion, slower growth compared with quota reduction in R22 (a YoY decline of 34,035 tonnes in 2015).  


Theoretically, the supply shortage of R22 should have showed in the market. However, CCM found no such phenomena. Manager Zheng from Zhejiang Juhua Co., Ltd. even stated that the insufficient supply will not appear within the next 2 years. He also disclosed that some R22 manufacturers with no production quota continued the production secretly. What’s worse, small enterprises not qualified for R22 production began to pass dichlorodifluoromethane (R12) off as R22, or use a mixture of R12, dimethyl ether and R22 to replace R22.


The influences brought by illegal production, including counterfeited and inferior R22 and R22 produced by enterprises with no production quota, are being deepened. If relevant government departments do not severely punish such violations, the interest of qualified producers will be threatened. Meanwhile, it will draw back the elimination of R22 and hinder the development of substitutes for R22.


With regard to the illegal R22 production:

- Qualified producers with production quota: price will be squeezed by R22 produced illegally. This will also draw back their expansion in substitute market;

- Distributors, traders and maintenance service: urged by low-price and high-profit R22 which is produced illegally, they would take the risk to purchase such R22.

- Refrigeration and air-conditioning manufacturers: commonly not choosing counterfeited and inferior R22, since it would largely shorten the service life of air-conditioning compressors and refrigeration system; inclined to using R22 produced by enterprises with no production quota, as it presents similar quality and they can squeeze price when purchasing.


In comparison with counterfeited and inferior R22, R22 produced by enterprises with no production quota will have more distinct impact on the industry, especially in the second half of a year when most of qualified enterprises have to reduce production because of lack for production quota.

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.


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