According to Kussel, most reclaimers in the U.S. are positioned for growth as demand increases for their services. The reclamation business is not just an R-22 market anymore, he said.

“The percentages of other refrigerants recovered have all increased in the last couple of years,” he said. “Because a majority of commercial systems are still operating with R-22, reclaimers should be able to supply the servicing demand well into the future until these systems reach the end of their life cycles.”

Taylor Ferranti, director of sales – refrigerants, A-Gas Americas, agreed the EPA’s final allocation ruling for 2015-2019 will help the industry promote reclamation over the next several years.

“As R-22 pricing trends upward from the phaseout, the market will begin to explore alternative, more environmentally friendly refrigerants,” Ferranti said. “As this happens, more and more units will be replaced and/or retrofitted, thus increasing the quantities of recovered R-22 sent into EPA-certified reclamation companies. The industry is aware that reclaimed R-22 will become a very important piece to our future supply of R-22, and the phasedown schedule should increase activity in reclamation.”

Bill Auriemma, CEO, Diversified Pure Chem, said the EPA phasedown schedule will definitely bolster the reclamation sector, and it will better position reclaimers to meet increasing product demands in the coming years.

“With R-22 allowances locked down, we can more accurately forecast our finances and continue to invest in equipment and resources, which is a win-win for reclaimers and contractors alike,” he said.

Some Challenges

Despite the optimistic outlook, the R-22 phaseout brings some challenges to the reclamation market, as well.

Jay Kestenbaum, senior vice president, sales and purchasing, Airgas Inc., noted that, in addition to continually increasing prices for remaining quantities of R-22, the need by the industry for continued supply can only be filled through recovery and reclamation.

“Unfortunately, many in the industry still do not believe reclamation will grow substantially as there is almost no enforcement for venting of the product during service, which can easily occur if contractors do not find it economically advantageous to recover small quantities from smaller systems,” he said.

Debra Goodge, reclaim programs manager, DuPont Chemicals and Fluoroproducts, said, with the EPA decreasing R-22 consumption allowances by 57 percent to 22 million pounds effective Jan. 1, 2015, the logical response in the marketplace would be a dramatic increase in the amount of recovered refrigerant returned by contractors to ensure continued supply of R-22 through and beyond 2020.

The reality, however, has been different. “We’ve not seen any spike in the volume of reclaim R-22 based on the EPA reclaim report,” said Goodge. “We don’t expect it will be any different once the 2014 reclaim report is published sometime in June. Even with new incentives, such as the BuyBack and banking options we’ve offered over the last several years, there have not been correlating increases to the amount of reclaimed R-22, we believe, mainly due to the stockpiling and re-use practices that will continue.”

At Hudson Technologies, Kevin Zugibe, CEO, said his company is very excited by the R-22 reclamation opportunity. “Reclamation is the most environmentally friendly and responsible means to service existing systems. By reclaiming and cleaning R-22 from systems that are coming offline, we can continue to service homeowners and businesses for years to come without producing one additional pound of R-22. In addition, by paying system owners for their used refrigerant, they’ll be more likely to minimize leaks and ensure the refrigerant is properly managed.”

However, Zugibe said that, although the phaseout of virgin R-22 is a significant environmental achievement, the EPA can and should do much more to support President Barack Obama’s Climate Action Plan by reducing the use of high-GWP (global warming potential) gases, including HFCs.

“We are optimistic the EPA will take more action to protect the environment and encourage responsible refrigerant management, which includes recovery and reclamation,” he said.

Into the Unknown

Carl Grolle, owner and president, Golden Refrigerant, noted there is a major unknown related to the phaseout: No one knows how scarce R-22 is going to become.

“What’s the demand going to be?” Grolle asked. “How much R-22 is sitting in warehouses right now, and what price points might bring that warehoused R-22 to the market? No one knows.”

Europe is experiencing a faster phaseout of R-22, which may push offshore R-22 to U.S. soil.

“As I understand it, there are some loopholes in the European legislation that allow reclaimed refrigerant, under certain conditions, to be imported into the U.S. and not be subject to the EPA numbers,” he said. “If a good portion of that comes over, it could have a pretty dramatic effect on the softening of any R-22 shortage here.”

Another unknown is the impact of alternative/replacement refrigerants on demand for R-22.

Grolle said the success of alternative refrigerants designed to replace R-22 will depend partially on how scarce R-22 becomes. “The more pain there is for a person to continue using R-22, the more incentive there will be for them to explore the options of these change-over refrigerants,” he said.

Zugibe advised caution when it comes to the replacement refrigerants. “While there are replacements for R-22, most of these substitute refrigerants are harmful to the environment on both a direct and indirect basis,” he said. “Specifically, most HFC substitutes for R-22 have a higher global warming potential than R-22, which is a direct impact, and systems designed for use with R-22 operate less efficiently with HFC substitutes, which is an indirect impact.”

Gordon McKinney, vice president and COO, ICOR Intl., said that even though R-22 prices have increased since the EPA finalized the 2015-2019 HCFC allocation last October, the surplus of R-22 carried over from previous years, combined with an increase in refrigerant mixing and other poor service practices, have inhibited growth for the reclaim sector. Companies that provide a full-service reclaim program also have to contend with what he called “abysmal” market conditions for HFCs.

“Average market prices for mainstream HFCs like R-134a, -404A, -407C, and -410A, are at record lows,” McKinney said. “Reclaim companies that process HFCs, which are mostly blends that require more resources to process, are finding it nearly impossible to compete with the price of virgin HFCs. The reclaim sector will not feel the full impact of the reduction of HCFC allocation until the R-22 surplus is trimmed down, and our industry has a legitimate supply/demand issue, which many believe will happen within the last half
of this year.”

Messages to the Marketplace

However, despite the challenges, most reclaimers are upbeat and are encouraging customers to avail themselves of their services.

“Our whole purpose in the reclamation sector is to help with the transitions that are taking place in refrigerants today,” Grolle said. “Like any industry, we do better when we’re needed than when we’re not.”

He expects the R-22 phaseout to be a repeat of what took place in the reclamation industry during the chlorofluorocarbon (CFC) phaseout, only with a larger scope. “There’s a lot more R-22 in service than there ever was R-12 and CFCs,” he said. “Our message to the marketplace continues to focus on the importance of having a sound refrigerant management plan: repair leaks, retrofit from R-22 to a non-ozone-depleting HFC refrigerant, manage your R-22 through recovery and reuse in the same owners equipment, and participate in a reclaim program,” said Goodge.

Added Kussel: “As the value of R-22 and other refrigerants increase, smart contractors should be seeking out the best reclamation, record-keeping, and cylinder-management programs. Part of a contractor’s future success lies in the ability to partner with a reclaimer that delivers superior, efficient, compliant, hands-off, and profitable services.”

Publication date: 4/6/2015