Hong Kong stock concept tracking | The implementation of the refrigerant quota policy continued to push up product prices, indicating the pricing power of the industry chain belongs to (with concept stocks)

On September 14, the Ministry of Ecology and Environment issued a draft for soliciting opinions on the total quota setting and allocation plan for the consumption of ozone-depleting substances and hydrofluorocarbons by 2025, with specific details as follows: 1. Third-generation refrigerants: 1) Based on 2024, an additional 45,000 tons of R32 for internal use quota, 8,000 tons of R245fa for internal production quota, 20 tons of R41 for internal production quota, and 50 tons of R236ea for production quota (non-internal use) will be allocated. The quotas allocated for increased production are based on the market share of the original refrigerants. 2) The rules for inter-species adjustments are basically the same as 2024, with an annual cumulative adjustment not exceeding 10% of the quota for that species, and adjustment frequency remains twice a year. 2. Second-generation refrigerants: 1) The total production quota for second-generation refrigerants in 2025 is 163,600 tons, with half for internal use/export, meaning a cumulative reduction of 67.5% compared to the baseline value for production quota and 73.2% for internal use quota, in line with the requirements of the Montreal Protocol. 2) Specifically, the production quota for R22 in 2025 is 149,100 tons, a decrease of 32,800 tons compared to 2024, with a reduction rate of 18%, and the internal use quota is 80,900 tons, a decrease of 31,000 tons compared to 2024, with a reduction rate of 27.7%. Other species will see even greater reductions. 3) In terms of usage quotas, the cumulative reduction rates for the air conditioner industry in 2025 are 70%, 67.5% for industrial and commercial refrigeration, and 89% for the cleaning industry. Overall, this quota plan is more unexpected compared to market rumors two weeks ago (previously rumored to increase 45,000 tons of quota + an annual cumulative adjustment of 30%), and compared to 2024, the internal use quota for R32 has only increased by 10,000 tons. Key points to watch in the market: 1) The 2025 quota plan is only a minor adjustment based on actual market supply and demand compared to 2024, without changing the foundation of the 2024 quota plan. Therefore, concerns about returning to the Kigali Amendment logic have been dispelled. Market expectations for policies are gradually improving. 2) Both the 2024 and 2025 increase in R32 quotas are for internal use, while markets like the United States are becoming increasing demand markets for R32 (as R454b gradually replaces overseas R410a), and foreign trade prices may surpass domestic prices in the future. 3) According to Sublime China Information, the ex-factory price of R32 has already risen to 38,000 yuan/ton this week. After the quota policy is implemented, further price increases indicate that pricing power is shifting in the industry chain. 4) With a nearly 30% reduction in R22 internal use quotas, price elasticity can be expected for next year. 5) Previous stock prices have fallen too much due to various policy expectations, and institutions believe that the price-to-performance ratio is evident after a stable landing. Refrigerant-related companies: DONGYUE GROUP (00189): Subsidiary Shandong Dongyue Silicone Material announces profit, with an estimated net profit attributable of 62-68 million RMB in the first half of the year, compared to a loss of 192 million RMB in the same period last year, turning a loss into a profit. This is mainly due to an increase in product output, sales volume, and operating income during the period, as well as a decrease in unit production costs and an increase in gross profit margin. DONGYUE GROUP has the highest R22 production capacity globally. In addition, DONGYUE GROUP's refrigerant products also include over 10 products such as R32, R125, R134a, all of which have seen varying degrees of price increases since the beginning of this year.