CITIC Securities: Continued tightening supply and demand pattern drives refrigerant prices into a long-term boom channel

The Zhitong Finance App learned that CITIC Securities released a research report saying that the refrigerant industry is in a policy restraint period for quota management. The supply and demand pattern continues to tighten to drive prices into the long-term boom channel. At the same time, the four-generation technology iteration has begun. It is recommended to seize the dual opportunities of rising third-generation refrigerant prices and fourth-generation technology iteration under two-wheel drive of policies and technology. In this context, focusing on industry leaders, patents and production capacity layout are simultaneously leading; at the same time, third-generation refrigerant-related companies are expected to benefit significantly.

CITIC Securities's main views are as follows:

Quotas were introduced in 2026, supply-side constraints for third-generation refrigerants continued, and the price increase logic remained unchanged.

In 2026, China's total quota for third-generation refrigerants was 802,000 tons, an increase of 3,050 tons compared to 2025. Among them, there were no increases in mainstream categories such as R32, R125, and R134a, and the increase can only be obtained through quota conversion. The share of the third-generation refrigerant industry is highly concentrated, and the top six companies control more than 90% of the share. Due to performance and technical reasons, third-generation refrigerants are still the main market force that cannot be replaced. As demand continues to grow and supply is strictly limited by quota policies, the supply and demand for third-generation refrigerants will maintain a tight balance, and the gap will continue to expand, driving the industry's prosperity to continue to rise; R32 is expected to continue to gain strength as the most important variety, and demand for R134a in the automotive sector and R125 in the mixing direction may be rapidly driven in the short term.

With the steady growth of the automotive sector and the rapid promotion of new energy vehicles, supply and demand for R134a is expected to tighten further.

According to the findings of the “Research on Vehicle Refrigerant Charge Calibration Methods for Heat Pump Thermal Management Systems” (Pan Leyan, Wang Tianying, Niu Fengxian, etc., 2022), the refrigerant charge of new energy vehicles reached 1100g/vehicle, an increase of nearly 100% compared to the 600g of traditional fuel truck cars. Policies such as the steady growth plan for the automobile industry, continued NEV purchase tax relief, and comprehensive electrification pilots in the public sector, which have been intensively introduced at the national level, are expected to stimulate automobile production and sales in 2026-2027. Against the backdrop of the rapid increase in the penetration rate of new energy vehicles and higher demand for refrigerants for bicycles, the R134a price increase logic will be further strengthened.

As a core component of R410a, R125 may be quickly boosted by renewal in the short term.

The R410A dominates the commercial and household multi-line central air conditioning sector. The huge stock maintenance market and the new demand brought about by home decoration upgrades have provided a steady growth engine. At the same time, the GWP value of R125 up to 3,500 has created a unique short-term demand window under current quota rules: domestic companies tend to convert their quotas to more cost-effective low-GWP products (such as R32), while developing countries such as India may actively import such high-GWP products in order to establish a higher consumption baseline by 2026, thus bringing a significant increase in foreign trade demand to China. Supply and demand for R125 may be even tighter in the short term.

Risk factors:

The risk of lagging technology research and development, the risk of fluctuations in international trade, the risk that prices of fourth-generation refrigerants will fall beyond expectations, the risk of industrial policy adjustments exceeding expectations, and the risk that downstream demand falls short of expectations.