Guosen Securities released a research report stating that the second-generation refrigerants will face compliance cuts in 2026, while the third-generation refrigerant quota system will continue. High industry concentration is observed for products like R32, R134a, and R125. The conversion ratio among third-generation refrigerants has increased year-over-year, enhancing production flexibility for enterprises. The report predicts that mainstream third-generation refrigerants will maintain a tight supply-demand balance in 2026.
The tightening of refrigerant quotas is a long-term trend, and under this backdrop, Guosen Securities remains optimistic about the sustained growth of mainstream refrigerants such as R32, R134a, and R125, with significant long-term price upside potential. Leading companies with substantial refrigerant quotas are expected to maintain high profitability. Additionally, the liquid cooling industry is anticipated to drive demand for fluorinated fluids and refrigerants.
Key points from Guosen Securities include: 1. **Quota Announcement for 2026**: On December 9, 2025, China's Ministry of Ecology and Environment disclosed the allocation of production, usage, and import quotas for ozone-depleting substances and hydrofluorocarbons (HFCs) for 2026. The ministry reviewed applications from 38 companies for second-generation refrigerant quotas and 65 companies for third-generation refrigerant quotas.
2. **Second-Generation Refrigerants**: Compliance-driven reductions will see R22 production quotas cut by 3,005 tons (2.02% YoY) and R141b quotas eliminated entirely. Despite these cuts, demand from air conditioning maintenance is expected to sustain R22's supply-demand balance.
3. **Third-Generation Refrigerants**: The total production quota for 2026 is 797,800 tons, up 5,963 tons from early 2025. R32, R125, and R134a quotas increased, while R143a, R152a, and R227ea saw declines. Companies can adjust quotas mid-year (by April 30 and August 31) within a 30% flexibility limit, provided total CO2 equivalent emissions remain unchanged.
4. **Investment Recommendation**: Given the tightening quota policies and high industry concentration, Guosen Securities favors leading fluorochemical companies with strong quotas, advanced technology, and integrated supply chains. Key players include
5. **Risks**: Potential risks include weaker-than-expected demand, stricter environmental policies, trade friction, sluggish real estate cycles, delayed project timelines, rising raw material costs, and safety incidents in chemical production.
The report underscores the long-term supply constraints and growth prospects for refrigerants, driven by regulatory policies and industrial demand.
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