A/C Refrigerant Prices

A/C Update: Expect Refrigerant Prices to Have Chilling Affect on Your Customers

Well, it seems expected higher fuel prices (national gasoline prices set a record average high in March) won’t be the only bee in the bonnet of drivers this summer. If their vehicles need A/C service, car owners may get charged up over the higher refrigerant costs, too.

Obviously, the fault is not yours – the shop owner or technician. But, you may be the one who takes the brunt of the customer’s complaint as the 2005 A/C service season heats up.

Of course, if the customer doesn’t like the A/C service price you quote, it’s not likely that they’ll just go off on his or her own and “charge up” their system. We’re seeing scarce supplies of the DIYer cans at retail outlets.

So what is the reason for the higher prices of refrigerant? Well, there are plenty of rumors out there – everything from new refrigerant taxes, to the war in Iraq, to the issue that R-134a isn’t going to be used in any more new vehicles. Some shop owners and techs have even speculated that the higher prices are falsely inflated as a way for suppliers to increase profits. Pretty chilling conspiracy theories, wouldn’t you say?

Some of those theories can be put to bed. Those who attended the Mobile Air Conditioning Society’s (MACS) convention in early February learned that the OEs aren’t ready to drop the R-134a systems and implement CO2-based air conditioning systems in vehicles for this country anytime soon. And though R-134a is likely to be phased out of A/C systems in European vehicles as part of the Kyoto Protocol, that move isn’t expected to take place until 2011-2017.

(For more on that subject and information on the Enhanced Generation R-134a systems that are to be produced in the next few years, see Larry Carley’s A/C Update column in the March issue of Underhood Service.

According to industry sources, it’s a combination of factors that’s contributed to the price increase. “A shortage of 134a, plants being switched over to produce alternate refrigerants and increased demand worldwide – have caught the industry off guard,” said Ward Atkinson, technical adviser for MACS.

Signs Were There
DuPont announced last September it was notifying customers of a supply shortfall for hydrofluorocarbon (HFC) 134a, marketed in the automotive air conditioning industry as DuPont Suva 134a refrigerant. “Due to a combination of the growth in global demand, and operational issues in 2004 at a major manufacturing facility, a significant production shortfall has occurred. This has constrained our ability to build inventory entering 2005, and although our production facilities are fully utilized, and we are making as much product as we can, we expect the shortfall to continue in 2005,” the DuPont release said.

About a month later, refrigerant manufacturer Honeywell followed suit, and announced that it, too, would be raising prices on refrigerant R-134a and four non-ozone depleting refrigerant blends used in air conditioning, refrigeration and foodservice applications. The increases were in the range of 5% to 6%, depending on product and package size, and were slated to take effect October 27.

According to Honeywell, the increases were necessary due to continued cost pressures on raw materials, manufacturing, packaging and distribution of these products. In addition, Honeywell cited unexpected strong global demand and limited availability of HFC-134a as motivation for the market action.

DuPont said that it plans to continue communications with its customers on projected supply limitations in order to give them as much lead-time for stock as possible. The company said it also has done everything possible to insulate its customers from the market forces of supply and demand – the driving force of the situation, but, “at some point the market realities impact everyone.”

In a recent article in the San Diego Union Tribune, DuPont officials said that they expect this year’s production of R-134a will be greater than it was in 2004, however the demand for the refrigerant is growing faster than the plants can manufacture it. Though demand and prices are rising, DuPont officials said it is unlikely that it would profitable enough to add another refrigerant manufacturing facility to meet the demand.

Other industry sources have said that since the government (EPA) ordered a change from R-12 Freon to the less environmentally damaging R-134a in the mid-1990s, there hasn’t been much of an increase in any refrigerant production facilities. There also is no EPA-approved alternative refrigerant to 134a, which some say also contributes to the problem.

In a letter to the industry dated February 11, Honeywell offered a refrigerant industry update, saying a global shortage of R-134a is currently impacting North America, not only for vehicle A/C systems, but for commercial refrigeration, aerosols, blowing/insulating agents and other industrial applications.

Honeywell said while the demand for R-134a is up significantly, it is likely to continue to increase due to three main issues:

More than 110 countries (including Mexico, Brazil, China and India) are required to reduce their production and consumption of CFCs this year by 50%. The phase-out of CFCs in these countries is to reach 85% in 2007 and complete phase-out by 2010. Since the primary replacement for CFC-12 is R-134a, you can see why demand for this refrigerant is going to grow rapidly in these countries.

There’s a growing market for factory-installed A/C systems in European vehicles, which also happens to be the largest car market in the world. Just a decade ago in 1995, only 30% of the new European vehicles had factory-equipped A/C. That percentage has grown to about 60% in 2005, and is expected to reach 80-90% by the end of this decade. With this growth in factory-installed units comes aftermarket demand for servicing the R-134a system in European vehicles.

Like Europe, China is now a factor in global R-134a demand. As the fastest-growing new car market on the globe, Chinese vehicle owners, too, are requesting factory-equipped R-134a A/C systems.

2005 Service Season
Now that the U.S. is in the middle of the peak ordering season (March through May) at a time of low inventory, shops can expect some supply interruptions, especially in bulk cylinders.

Jay Kestenbaum, president of Refron, Inc., a nationwide refrigerant supplier headquartered in Long Island, NY, said many smaller shops are going to be in for a surprise when they try to order product this A/C service season. “It’s going to be a wild season,” Kestenbaum said, adding many small shops, gas station service businesses or repair shops in the northern parts of the country that haven’t ordered refrigerant lately probably are unaware of the price increases and limited supplies. “Some of these guys who haven’t needed to buy refrigerant in the past seven months don’t even know what’s going on here,” Kestenbaum said.

Kestenbaum explained a scenario that he expects many small shops will face in the few weeks. On the first warm day this season, there will be cars pulling in to have their systems recharged. Unfortunately, when the shop owner or technician calls in an order for more refrigerant, he’s going to be in for a real shock. “When he hears the price quoted back to him or if he even has trouble locating refrigerant due to back orders, that’s when the panic will set in,” Kestenbaum said.

Honeywell officials noted that the supply situation of R-134a is not likely to quickly improve. “Several R-134a producers had production difficulties in 2004 that have resulted in unusually low inventories entering the 2005 season,” the letter stated. “Although it is possible for producers to recover if plants operate well, this is not guaranteed and it will take several months to make up for lost production.”

MACS Issues Technician Reminder

Because of the reduced availability and increased cost of HFC-134a, the Mobile Air Conditioning Society (MACS) Worldwide in March issued a reminder to all service technicians who perform mobile A/C system service and repair regarding acceptable refrigerant use.

According to MACS, even though there are a number of other refrigerants on the market listed by the U.S. EPA as environmentally acceptable, they are for use only in CFC-12 automotive A/C systems. The EPA listing does not identify any replacement refrigerant for HFC-134a systems, and the U.S. EPA has not evaluated alternative refrigerants for system performance and durability.

Vehicle manufacturers have approved HFC-134a for use in vehicles starting in 1992. CFC-12 is approved in vehicles manufactured prior to the change over to HFC-134a, and HFC-134a is the only refrigerant approved for use by vehicle manufacturers as a retrofit refrigerant for CFC-12 vehicles. Current HFC-134a mobile A/C systems are designed and tested only for use of HFC-134a refrigerant and the specific lubricant (PAG).

For more on the Significant New Alternatives Policy (SNAP) and replacement refrigerants and MACS’ service reminder statement to technicians, visit the MACS website at www.macsw.org.

NARSA Visits Buffalo for Regional Spring Conference

Mt. Laurel, NJ – The National Automotive Radiator Service Association (NARSA) announced that the organization’s 2005 Regional Spring Conference will be held April 28-30 in Buffalo, NY. The conference is part of an ongoing effort to educate members of the heat transfer and engine cooling industry on the latest technical issues affecting their businesses as well as expose them to the latest products from the top suppliers.

Charlie Fewell, a trainer in the industry will provide the keynote address “The Seven Secrets of Successful Businessmen and Women.”

Other highlights of the conference include:

Facility tours of Delphi, Valeo, Visteon and Voss Manufacturing.

Industry educational/technical seminars on coolant chemistry, climate control and high-performance engine cooling.

A Product Promenade featuring the industry’s leading manufacturers and suppliers.

The 2005 Regional Spring Conference is open to all professionals in the engine cooling and heat transfer industry. To register or for more information on NARSA, visit www.narsa.org.

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