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

Guojin Securities released a research report stating that the regional conflicts in the Middle East, along with the situation in the Strait of Hormuz, indeed have an impact on the export of refrigerants and downstream air conditioning exports in the short term. However, this impact is expected to be significantly compensated once transportation is resumed. Furthermore, the influence of oil and gas prices is likely to promote a further increase in 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 advisable to pay attention to leading companies in the refrigerant industry.

The main viewpoints of Guojin Securities are as follows:

The supply pattern of refrigerants, as the core support for long-cycle price increases, remains unchanged in the long term.

Refrigerants, as a typical product category with strict supply-side limitations, are among the few products that have shown continuous improvement in long-cycle profitability. The industry for third-generation refrigerants has already passed the intense competition of the benchmark period from 2020 to 2022 and has entered a phase of industry-controlled production:

① Enterprises 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 enterprises are also constrained by quota production and cannot freely and fully expand their current production capacity;

③ The industry supply pattern is clearly concentrated, with weaker enterprises gradually eliminated during earlier competition, and only a few enterprises can obtain quotas for production;

④ After more than two years of sorting through the industrial chain, the initial pricing model for refrigerants has fundamentally reversed. Refrigerants have significantly increased their pricing power in the industrial chain due to supply-side constraints, and downstream products exhibit controllable price sensitivity during slight price increases;

⑤ Currently, third-generation refrigerants still serve as the main solution in multiple refrigerant scenarios, and there are no economically comparable or mature alternative products in the short term, with expectations that they can maintain a longer lifecycle than second-generation refrigerants.

Considering multiple dimensions, the long-term logic of refrigerants has not changed. The global implementation of refrigerant production quotas in the domestic market still exists, and 2026 is the last year of the quota baseline period for hydrogen fluorocarbons in the second group of developing countries. The number of countries entering quota constraints will further increase in the future. Whether globally or domestically, supply restrictions on the production side still exist. Refrigerants continue to possess pricing power and quota barriers, thus maintaining a positive outlook for price increases in refrigerants from a long-cycle perspective. At the end of February, the refrigerant industry welcomed an overall price increase for third-generation refrigerants for 2026, with R134a prices rising by 1000 yuan, R32 by 500 yuan, R125 by 1000 yuan, and R410 by 500 yuan. The refrigerant industry is about to enter the domestic demand peak season, and overall price adjustments still have industry fundamentals.

In the short term, the exports of refrigerants and air conditioners are slightly impacted by the situation in the Middle East, but the impact remains controllable, and recovery is anticipated.

The refrigerant and industrial chain have formed two types of export exposures: direct refrigerant exports and downstream air conditioning exports. The Middle East, as a high-temperature region, is one of the terminal demand areas in the industrial chain, and thus the recent regional conflicts have indeed had some impact on the industry. On one hand, the Middle East, as one of the main demand areas for China’s refrigerant exports, occupies a small proportion, with the export shares to the Middle East in 2025 for R22, R32, R134a, R125/143a, and R410 being 9%, 2%, 14%, 11%, and 10% of total exports, respectively. Due to local conflicts and transportation restrictions in the Strait of Hormuz, there have been significant delays in the delivery of refrigerants to the Middle East. On the other hand, in the terminal air conditioning sector, the Middle East, due to its hot weather, is also a relatively concentrated area for air conditioning exports. In 2025, China’s household air conditioning exports to the Middle East exceeded 17 million units, accounting for 20.8% of total exports. Among them, the core region affected by the war saw air conditioning exports of 8.36 million units, accounting for 10.2% of total exports. The impact of the situation in the Middle East has led to a decline in air conditioning export orders.

The temporary transportation impact has created restrictions, but future demand rebound and restocking needs are expected to recover some of the previous impact.

Whether from the refrigerant or terminal air conditioning field, the regional conflicts in the Middle East have indeed brought about temporary industry impacts. Refrigerant export orders have been delayed, and downstream production schedules have been slightly adjusted downward. However, rationally, part of these orders are delayed rather than disappearing. The natural conditions in the Middle East make air conditioning a necessity that is hard to replace. Previously, local refrigerant manufacturers in the Middle East still had inventory, and as this inventory is gradually consumed, it means that once transportation through the strait is resumed, there will be a direct acceleration in demand release and significant restocking needs. Coupled with the reconstruction of bombed areas in the Middle East, the refrigerant and downstream industrial chain is expected to welcome a significant rebound in demand.

Risk Warning

Risks related to high oil prices suppressing demand, fluctuations in policies promoting consumption, and the risk of further escalation of geopolitical conflicts, etc.