Regardless of your politics last month’s election was definitely a surprise. Obviously, the election of Donald Trump will have a profound impact on the country and the rest of the world. The question I ask to you is what kind of impact will he have on the United States’ refrigerant market?
Now, we all know what kind of affect Barack Obama had on the market. While he didn’t preside over the phase out of HCFCs like R-22 he did preside over the beginning stages of phasing out HFC refrigerants such as R-134a, R-404A, and R-410A. All of his actions were in response to his Climate Change Action Plan. (This link to whitehouse.gov will show more detail.) Obama used the Environmental Protection Agency to impose new regulations on HFCs and to eventually phase them out entirely. His goal was to replace all of these refrigerants with the less potent, but more flammable, HFO refrigerants such as 1234YF. On top of that he also pressured other countries to do the same. (India, China, Pakistan, and others.)
R-404A is the first to go away and the process has already begun. In 2015 the EPA listed R-404A as unacceptable in newly manufactured machines as of 2017. This covers all supermarket refrigerators and freezers. Vending machines get a bit more of a break and have a deadline of 2019. I wrote an article about this at the time of the release and it can be found by clicking here. Next on Obama’s list was R-134a. The EPA has listed 134a as unacceptable in new vehicles as of the year 2020. (2021 model years.) The goal here is to switch everyone over to 1234YF or to other natural refrigerants.
So we know what Obama did and wanted to do the question is what do we predict Trump doing over the next four years? While I am not a fortune teller I believe the answer can be drilled down to two main points:
Tariffs on Imports
Before President Trump was even a pipe dream there were already anti-dumping law suits filed against Chinese companies importing their R-134a refrigerant in mass. The complaint was that the Chinese companies were being subsidized by the Chinese government which caused their price to lower to unheard of levels. Since this cheaper import was being flooded into the United States market it caused the US refrigerant manufacturers to drop their price as well. While this may sound good for the consumer it was actively hurting the manufacturers such as Honeywell, DuPont/Chemours, and Mexichem. Along with hurting US companies it also allowed for impure 134a product from China to enter the market. (Not all of the Chinese product was one-hundred percent 134a.)
The three companies I just mentioned joined together in a group called the American HFC Coalition. The coalition filed a suit with the US government’s International Trade Commission. The Trade Commission took over a year to decide and so far nothing official has happened but the signs are all pointing to an imposed tariff on the imported 134a.
The commission is due to hold another hearing on February 23rd, 2017 on it’s decision. (Link about it can be found here.) The rumor is that there will be around a two-hundred percent tariff imposed on new product. This tariff may in fact even be retroactive on previous imports. So, if you imported 134a in the past you may be at risk of having to pay the tariff or fine on your old product. This has many small business owners very nervous.
Throughout the campaign Donald Trump has stated again and again that he is against China. In his words they have been doing a trade war with the United States and they have been winning. He has also said that he is in favor of large tariffs on companies that move jobs overseas. It only seems logical that he would be in favor of anti-dumping tariffs on Chinese imported refrigerant.
I foresee that when he becomes President that he will push this even more than it already is. Chemours and Honeywell will grab his ear and he will push his Trade Commission hard and fast to approve the tariffs. If this does get approved the price on a cylinder of R-134a could reach upwards to $150-$200 a cylinder perhaps even higher than that.
Climate Change Skepticism
Well that first part was the bad news. Are you ready for the good news now? Donald Trump has stated again and again that he believes Climate Change to be a hoax. Believe it or not, this is good for the price of refrigerants. On top of his stance on climate change he has also stated that he will be getting rid of regulations across the board. Combining these two stances I could see Trump reversing course on the EPA’s decision to phase out 404A and 134a.
The whole reason they are being phased out is due to their Global Warming Potential and how they contribute to Global Warming. If Trump doesn’t believe in Global Warming in the first place why would he instill these hardships on businesses across the country? It just doesn’t make sense.
I don’t see this being a top priority for Trump right away but I feel as time goes on into his term and his consultants bring this to his attention that he will make the move to stop the HFC phase out before the deadline hits.
Having Trump is a mixed bag for the refrigerant industry. On one hand you get the Climate Change skepticism and the most likely remaining of HFC refrigerants. On the other hand though you have his hatred of China and their trade war. Over the next few years I predict we’ll see:
Tariffs installed not only on 134a but on other refrigerants as well. (410A and maybe even 1234YF.) These tariffs will force companies to make their product here in the US.
Reduction or total cancellation of HFC phase outs. (Including 404A, 134a, and 410A.)
Thanks for reading,
Alec John Johnson