Powell's Ponderings: Raw - Refrigerants and Material Costs
Peter Powell
That crossover point hasn’t been reached yet, and a lot of issues are mixing themselves into an already confusing situation. (By the way, the issues in this column are not directly related to the conversion of new a/c equipment away from R-22, or the phaseout in new R-22 production. More of those topics will be covered in 2009.)
There has been a recent, rapid rise in the cost of all refrigerants, primarily due to raw material issues beyond the control of the HVACR industry. The main issues, according to officials at Honeywell who contacted me, relate to the rising costs of sulfuric acid, fluorspar, and hydrocarbons. As it was explained to me, sulfuric acid is a basic raw material for hydro fluorocarbon refrigerants, and its cost has been rising rapidly over the past year. Its use in fertilizers, and as a part of bio-fuels in increasing amounts worldwide, is driving up costs.
Ironically, decreasing demand for crude oil is affecting sulfuric acid prices, because it is a byproduct of oil refining. As refining decreases, so does the supply of sulfuric acid.
Fluorspar is another component of refrigerant production that is primarily available only in China. It is also in increasing demand worldwide, accompanied by China export taxes that put pressure on price. Yet another material with cost issues is hydrocarbon derived from oil, and used in the production of all refrigerants.
THE OIL
Which brings us back to the oil issue. At the time of the phone conversation in late summer, energy costs were on the rise, most dramatically seen at the fuel pump when a barrel of oil was nearing $140 and pump prices were around $4.20 a gallon where I live. When this column was being written in early November, a barrel of oil was around $60 and the pump price nearest me was $2.29. I cannot begin to even guess what those costs might be when you are reading this in early December.The mere fact that those prices seem to be bouncing around so much doesn’t make long-term decisions and planning an easier task. There is a temptation to assume a worse-case scenario and incorporate higher costs into the cost of doing business. I suspect many contractors have to do that, using means such as fuel surcharges.
Beyond all those chemicals, there are still most cost pressures. David Diggs, global business director for refrigerants at Honeywell, said there are added energy costs to produce refrigerants, especially those of higher pressures, and the cost of steel to manufacture 30-pound cylinders. “We continue to take all necessary actions to mitigate price increases for our customers,” he said. “However, there is only so much we can do.”
WHAT TO DO
One way to hold down the cost of refrigerants is by using as little virgin refrigerant as possible. Maintaining leak-tight systems means having to buy less new refrigerant to replace the stuff that leaked out. Properly recovering and reusing refrigerants (rather than venting) can mean big savings.Finally, submitting refrigerants of questionable purity to reclamation facilities has the potential for a positive payback.
In short, one way to combat the rising costs of refrigerants is to use less of the stuff. It isn’t easy, I know. On the jobsite, a quick-but-temporary fix is often what customers want instead of long-term solutions - and it’s all they are willing to pay for. Currently, dumping a few more ounces or pounds of a refrigerant into a less-than-really-tight system ends up costing less than really tightening up the system - for now.
Those are not the “best practices” often talked about in the industry today.
In one respect, we may seem to be asked to apply those best practices in response to lofty environmental goals. But in a more practical sense, rising refrigerant costs are going to be the greatest motivator.
Publication date: 12/01/2008