Guojin Securities: The Middle East situation does not affect core factors; refrigerants still have long-term logic.

Guojin Securities pointed out that the regional conflicts in the Middle East, combined with the situation in the Strait of Hormuz, do indeed impact the export of refrigerants and downstream air conditioning products in the short term. However, this effect is expected to be significantly compensated once transportation is resumed. Additionally, the impact of oil and gas prices is also likely to further promote the penetration rate of domestic new energy vehicles, driving up the demand for automotive refrigerant R134a. It is estimated that the long-term logic for refrigerants remains unchanged, and it is still recommended to pay attention to leading enterprises in the refrigerant industry.

The full text is as follows

Guojin Chemical Chen Yi｜The Middle East situation does not affect core factors; refrigerants still possess long-term logic

Investment logic

The supply pattern of refrigerants serves as the core support for long-term price increases, with the long-term trend remaining unchanged. Refrigerants, as a type of product with strictly limited supply on the supply side, are among the few products that have the potential for sustained long-term profitability improvement. Since the third-generation refrigerant industry has passed through the heated competition of the baseline period from 2020 to 2022, it has now entered a phase of industry-controlled production:

① Companies that did not produce and sell during the quota period cannot obtain production and sales quotas (unless they buy quotas at high prices or through mergers and acquisitions);

② Existing production companies also face constraints on quota production and cannot freely expand their existing production capacity;

③ The industry supply pattern is clearly concentrated, with tail-end companies gradually eliminated in the previous competition, leaving only a few enterprises capable of obtaining quotas for production;

④ After more than two years of industrial chain sorting, the initial pricing model in the refrigerant segment has fundamentally changed. Refrigerants, due to constraints on the supply side, have significantly enhanced their pricing power in the industrial chain. The price sensitivity of downstream products is controllable as prices rise slightly;

⑤ Currently, the third-generation refrigerants still serve as the main solution among multiple refrigerant scenarios, with no economically viable or mature alternative products expected in the short term, and it is estimated that they can maintain a longer lifecycle compared to second-generation refrigerants.

Considering multiple dimensions, the long-term logic for refrigerants has not changed. The global implementation of refrigerant production quota constraints in China still exists, and 2026 marks the final year of the baseline period for the second group of developing countries regarding hydrofluorocarbon quotas. The number of countries entering quota constraints will further increase in the future. Whether globally or domestically, production-side supply restrictions still exist, and refrigerants continue to hold pricing power and quota barriers at the top level. Therefore, from a long-term perspective, the price increase of refrigerants is still optimistic. At the end of February, the refrigerant industry welcomed an overall price increase for the third-generation refrigerants in 2026, with R134a prices raised by 1,000 yuan, R32 by 500 yuan, R125 by 1,000 yuan, and R410 by 500 yuan. The refrigerant industry is about to enter the domestic demand peak season, and the overall price adjustment still has an industry foundation.

In the short term, the export of refrigerants and air conditioning products is slightly affected by the situation in the Middle East, but the impact is still controllable, and recovery is expected later. The refrigerant and industrial chain have formed two types of export exposure: direct refrigerant exports and downstream air conditioning exports. The Middle East, as a high-temperature region, is one of the terminal demand areas for the industrial chain, and thus the short-term regional conflicts have indeed had some impact on the industry. On one hand, the Middle East is one of the main demand areas for China’s refrigerant exports, accounting for a small proportion. By 2025, the exports of refrigerants R22, R32, R134a, R125/143a, and R410 to the Middle East are expected to account for 9%, 2%, 14%, 11%, and 10%, respectively, of the total export volume. Due to local conflicts in the Middle East and transportation restrictions in the Strait of Hormuz, there has been a large-scale delay in the delivery of refrigerants to the Middle East. On the other hand, in the terminal air conditioning field, the Middle East, due to its hot weather, is also a relatively concentrated area for air conditioning exports. By 2025, the scale of China’s household air conditioning exports to the Middle East is expected to exceed 17 million units, accounting for 20.8% of the total exports, of which the core areas impacted by the war will see air conditioning exports of 8.36 million units, accounting for 10.2% of the total exports. The situation in the Middle East has caused a decline in air conditioning export orders.

The temporary impact on transportation has created restrictions, but the rebound in demand and replenishment needs in the future are expected to compensate for some of the earlier impacts. Whether from the refrigerant or the terminal air conditioning sector, the regional conflicts in the Middle East have indeed brought about temporary industry impacts, leading to delays in refrigerant export orders and slight adjustments in downstream production schedules. However, rationally speaking, part of these orders are delayed rather than disappeared. The natural conditions in the Middle East make air conditioning a necessity that is difficult to replace. In the previous phase, local refrigerant manufacturers in the Middle East still have inventory. As this inventory is gradually digested, it means that once transportation in the strait is resumed, there will be a direct acceleration of demand release and significant replenishment needs, combined with the reconstruction of certain bombed areas in the Middle East. The refrigerant and downstream industrial chain are expected to welcome a significant rebound in demand.

Investment recommendations

In the short term, the regional conflicts in the Middle East, combined with the situation in the Strait of Hormuz, indeed impact the export of refrigerants and downstream air conditioning products, but this effect is expected to be significantly compensated once transportation is resumed. Additionally, the impact of oil and gas prices is likely to further promote the penetration rate of domestic new energy vehicles, driving up the demand for automotive refrigerant R134a. It is estimated that the long-term logic for refrigerants remains unchanged, and it is still recommended to pay attention to leading enterprises in the refrigerant industry.

Risk warnings

The risks of high oil prices suppressing demand, the risks of fluctuations in policies promoting consumption, and the risks of further escalation of geopolitical conflicts, etc.

(Source: Yicai)

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