CITIC SEC released a research report stating that the refrigerant industry is currently under policy constraints due to quota management, with tightening supply-demand dynamics driving prices into a long-term growth channel. Simultaneously, the transition to fourth-generation technology has begun, presenting dual opportunities from rising prices of third-generation refrigerants and fourth-generation technological advancements under policy and innovation drivers. Against this backdrop, focus should be on industry leaders with leading patents and production capacity, while third-generation refrigerant-related companies are expected to benefit significantly. CITIC SEC's key views are as follows:
The 2026 quota announcement maintains supply-side constraints on third-generation refrigerants, reinforcing the price increase logic. China's total third-generation refrigerant quota for 2026 is set at 802,000 tons, a marginal increase of 3,050 tons from 2025. Notably, mainstream categories like R32, R125, and R134a saw no quota expansion, with incremental supply only achievable through quota conversion. The third-generation refrigerant market is highly concentrated, with the top six companies controlling over 90% of the market share. Due to performance and technical factors, third-generation refrigerants remain irreplaceable as the market's mainstay. Against sustained demand growth and strict supply constraints under quota policies, third-generation refrigerants will maintain a tight supply-demand balance with widening deficits, driving prolonged industry growth. R32, as the dominant product, is expected to sustain momentum, while R134a in automotive applications and R125 for blended uses may see rapid demand growth in the near term.
Automotive sector stability and rapid NEV adoption could further tighten R134a supply-demand. According to research findings from "Calibration Method for Refrigerant Charge in Heat Pump Thermal Management Systems" (Pan Leyan, Wang Tianying, Niu Fengxian et al., 2022), NEVs require 1,100g of refrigerant per vehicle—nearly double the ~600g for traditional fuel vehicles. National policies promoting automotive sector stability, extended NEV purchase tax exemptions, and comprehensive electrification pilots in public sectors are expected to boost 2026-2027 vehicle production. With accelerating NEV penetration and higher per-vehicle refrigerant demand, R134a's price increase logic will strengthen further.
As a core component of R410A, R125 may experience rapid near-term demand growth. R410A dominates commercial and residential multi-split central air conditioning systems, with stable growth driven by maintenance needs for existing systems and new installations from home upgrades. Additionally, R125's high GWP of 3,500 creates a unique short-term demand window under current quota rules: domestic producers prefer converting quotas to lower-GWP alternatives like R32, while developing countries like India may actively import high-GWP products to establish higher consumption baselines before 2026, potentially generating significant export demand for China. R125 supply-demand may tighten further in the short term.
Risk factors: Technology R&D delays, international trade volatility, unexpected price declines in fourth-generation refrigerants, unforeseen industrial policy adjustments, and weaker-than-expected downstream demand.
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