Counting The Cost Of Supply And Demand
It is generally not the policy of The NEWS to discuss specific prices for products and services in the industry, other than running percentage increases in OEM products as officially announced by manufacturers; and occasional stories on hourly rates for technicians in various parts of the country.
Refrigerant prices are usually a result of supply and demand and there are separate forces acting on those aspects. The supply side, when it comes to R-22, is being affected by government regulations requiring a reduction in the amount of HCFCs (of which R-22 is an example) that can be produced.
Right now, only 65 percent of the R-22 that was being produced in 1999 can be made. In a little more than four years, that percentage will drop to 35 percent.
A temporary pressure on supply is the result of the recent hurricanes in the Southeast United States. Production plants in that area were battened down and intentionally shut down temporarily in anticipation of the storms. Even as they came back on-line, the distribution channels through that part of the country needed time to get back to full operation.
On the demand side, R-22 remains the refrigerant of choice especially in the air conditioning sector, even as manufacturers start making more and more equipment using the HFC R-410A. Manufacturers have until 2010 for a complete switchover, so the best guess is that a large number of R-22 units will continue to come off the assembly line for several more years.
And, of course, we have existing systems that are now leaking R-22. Tighter systems could be a factor in easing the demand on R-22.
Right now, the per pound cost of R-22 still has not come close to crossing the higher cost of R-410A, and it may be several more years before that happens.
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In talking with contractors regarding this, one point keeps coming up. The cost of refrigerants is a factor in a project, but it is often not the major one. In a new installation, labor costs and equipment take the biggest bite. In repair or retrofit jobs, labor is again the big ticket item and if the problem doesn't involve refrigerant leakage, then the refrigerant cost aspect is a non-issue. End users also often don't angst over refrigerant costs. A supermarket manager has store personnel labor costs and power generation charges at the top of the cost list. Mechanical refrigeration equipment is on the list, but what part of that is HCFC refrigerant-related?
Right now, the industry seems to be riding out rising HCFC refrigerant costs, especially R-22. Let's hope we can continue to do so until the next generation of more energy-efficient equipment running on HFCs becomes more commonplace.
Peter Powell is refrigeration editor. He can be reached at 847-622-7260, 847-622-7266 (fax), or peterpowell@achrnews.com.
Publication date: 12/05/2005