Guosen Securities: Reduction in compliance of second-generation refrigerant quotas and increased flexibility in the adjustment of third-generation refrigerant quotas

According to the Zhitong Finance APP, Guosen Securities released a research report stating that the compliance reduction of second-generation refrigerants will occur in 2026, while the quota system for third-generation refrigerants will continue. The industry concentration of varieties such as R22, R32, and R134a is high; the conversion ratio between third-generation refrigerant varieties has increased year-on-year, and the flexibility of enterprise production and allocation has improved. It is expected that the mainstream third-generation refrigerants will maintain a tight balance between supply and demand in 2026. The tightening of refrigerant quota constraints is a long-term trend, and against this backdrop, the prosperity of mainstream refrigerants such as R32 and R134a is expected to continue, with significant long-term upward price potential; leading companies corresponding to refrigerant quotas are expected to maintain a high level of profitability in the long term. In addition, the demand for fluorinated liquids and refrigerants in the liquid cooling industry is expected to increase.

The main points of Guosen Securities are as follows:

The Ministry of Ecology and Environment has released the total quota setting and allocation plan for refrigerants in 2026, optimistic about the continued prosperity of refrigerant products.

On October 24, 2025, the Ministry of Ecology and Environment officially issued the "Total Quota Setting and Allocation Plan for Ozone-Depleting Substances for 2026" and the "Total Quota Setting and Allocation Plan for Hydrofluorocarbons for 2026." The plan adheres to the principles of goal orientation, seeking progress while maintaining stability, phased implementation, and classified policies. The second-generation refrigerant quotas strictly implement annual compliance elimination tasks, while the third-generation refrigerant quotas have made slight adjustments to the allocation of certain products, considering industry development needs and the implementation of HFCs quotas in 2025, raising the upper limit of the inter-variety adjustment ratio for 2026 from 10% to 30%.

Guosen Securities believes that the seriousness of the quota policy will continue, and under the long-term strong constraints on the supply side, the continued prosperity of refrigerant products is expected.

HCFCs: The total production and usage in 2026 will be reduced to 71.5% and 76.1% of the baseline values, respectively, with R22 production quotas reduced by 3,000 tons year-on-year.

According to the "Total Quota Setting and Allocation Plan for Ozone-Depleting Substances for 2026," the total production quota for HCFCs in China in 2026 is 151,400 tons, with the total internal production quota and usage quota being 79,700 tons. The production and usage of HCFCs in 2026 will be reduced to 71.5% and 76.1% of the baseline values, respectively. In terms of specific products, the R22 production quota/internal production quota will be reduced by 3,000/2,910 tons compared to 2025, a year-on-year decrease of 2.01%/3.60%; the R141b production quota/internal production quota will be zeroed. The relatively large reduction in R22 and R141b quotas may improve the supply-demand structure of R22. It is estimated that the allocation of R22 production quotas in 2026 will be approximately: Dongyue Group 43,000 tons, ZJJH 38,100 tons, Meilan Chemical 30,200 tons, Arkema 8,600 tons, and Sanmei 7,700 tons.

HFCs: Based on the 2025 quotas, there will be two opportunities for quota adjustments within the year, with the total adjustment ratio between different varieties not exceeding 30%.

The Ministry of Ecology and Environment has increased the production quota of R245fa by 3,000 tons (of which the internal production quota is 3,000 tons) and the quota of R41 by 50 tons (of which the internal production quota is 50 tons) based on the demand for alternatives to HCFCs and the growth demand for R41 in the semiconductor industry, while other varieties' quotas remain consistent with those of 2025 In terms of quota adjustments, there are adjustments within the same variety and between different varieties. Quotas of the same variety can be adjusted equally among different production units; adjustments between different varieties must meet the following conditions: (1) not increasing the total CO2 equivalent, (2) the cumulative adjustment increment does not exceed 30% of the allocated quota amount determined by the allocation method, which is a slight increase from last year's ratio (10%). The number of adjustments remains twice a year, with adjustment times set for April 30 and before August 31. Under the premise that the quota system's restrictions remain unchanged, production enterprises can adjust production more flexibly based on actual supply and demand. Among them, enterprises with a complete variety and a higher quota amount have stronger adjustment flexibility due to the involvement of quota adjustments between different varieties.

R22 prices stabilize after a decline, while the prosperity of mainstream third-generation refrigerants like R32 and R134a continues

R22 is gradually entering the off-season for demand, coupled with the shrinking maintenance demand after the replacement of old air conditioners, it is expected that there may be a surplus of R22 quotas within the year, and enterprises are clearing inventory by lowering prices. According to Zhuochuang Information, the average price of R22 in Q3 2025 dropped to 34,100 yuan/ton, a decrease of 429 yuan/ton compared to the average price in Q2; according to Fluorine Online, since October, R22 prices have dropped to 15,000-18,000 yuan/ton, and the low-price strategy has improved market purchasing sentiment, leading to smoother shipments, with prices later rising and stabilizing at 18,000-20,000 yuan/ton.

R32 shows strong performance. Against the backdrop of sustained demand growth, refrigerant companies have a strong willingness to maintain the R32 market, with prices steadily rising, reaching an average of 59,000 yuan/ton in Q3 2025, an increase of 8,534 yuan/ton compared to Q2; the current mainstream transaction price in the market remains at 61,000-62,000 yuan/ton. Due to the continuous consumption of quotas, the average price of R134a rose to 51,000 yuan/ton in Q3 2025, an increase of 3,360 yuan/ton compared to Q2; current quotes are gradually rising to 53,000 yuan/ton. R410a, driven by the high price of R32, reached an average price of 51,000 yuan/ton in Q3 2025, an increase of 2,830 yuan/ton compared to Q2; current quotes have risen to 52,000-55,000 yuan/ton. The prices of R125, R143a, and R507 in the second and third quarters and currently remain stable at 46,000 yuan/ton.

Target Aspects

It is recommended to pay attention to leading fluorochemical enterprises with a complete industrial chain, well-equipped infrastructure, leading refrigerant quotas, and advanced process technology, as well as upstream resource leaders. Related targets include ZJJH (600610.SH), Dongyue Group (00189), and Sanmei (603379.SH).

Risk Warning

Demand for fluorochemical products may fall short of expectations; policy risks (stricter environmental policies for fluorinated refrigerants, accelerated upgrade processes, changes in quota issuance policies, etc.); global trade frictions and export obstacles; low prosperity in the real estate cycle; project production progress of various companies may not meet expectations; rising raw material prices; chemical safety production risks, etc