Guosen: The compliance of the second-generation refrigerant quota has been reduced, while the flexibility of the third-generation refrigerant quota adjustment has been increased.

Guosen released a research report stating that in 2026, the second-generation refrigerant compliance reduction will be implemented, while the quota system for third-generation refrigerants will continue. Varieties such as R22, R32, and R134a have a high industry concentration. The conversion ratio between different third-generation refrigerant varieties is expected to increase year-on-year, improving the flexibility of enterprise production allocation. It is predicted that mainstream third-generation refrigerants will maintain a tight supply-demand balance in 2026. Refrigerant quotas are expected to tighten in the long term, and in this context, mainstream refrigerants such as R32 and R134a are expected to continue to be prosperous, with prices having significant upward potential in the long term. Leading refrigerant quota companies are expected to maintain high profitability levels in the long term. In addition, there is optimism about the increase in demand for fluorinated liquids and refrigerants in the liquid cooling industry. Guosen's main points are as follows: The Ministry of Ecology and Environment released the total refrigerant quota allocation plan for 2026, and Guosen is optimistic about the continued prosperity of refrigerant products. On October 24, 2025, the Ministry of Ecology and Environment officially issued the "2026 Annual Allocation Plan for Ozone Depleting Substances" and the "2026 Annual Allocation Plan for Hydrofluorocarbons." The overall plan adheres to the principles of goal orientation, steady progress, phased implementation, and classified measures. The second-generation refrigerant quotas strictly implement annual compliance and elimination tasks, while the quotas for third-generation refrigerants have been slightly adjusted based on industry development needs and the HFCs quota implementation in 2025. The adjustment now allows for a maximum of 30% conversion ratio between different varieties in 2026. Guosen believes that the seriousness of the quota policy will continue, and under the long-term strong constraints on the supply side, the prosperity of refrigerant products is expected to continue. HCFCs: Production and use quotas for 2026 are reduced by 71.5% and 76.1%, respectively, R22 production quota decreased by 3000 tons year-on-year According to the "2026 Annual Allocation Plan for Ozone Depleting Substances," China's HCFCs production quota in 2026 is 151,400 tons, with a domestic production quota and use quota of 79,700 tons. The production and use of HCFCs in China in 2026 are reduced by 71.5% and 76.1% compared to the baseline values. Specifically, the production and use quotas for R22 have been reduced by 3000 and 2910 tons respectively compared to 2025, a decrease of 2.01% and 3.60% year-on-year, respectively. The production and use quotas for R141b have been reduced to zero. The significant reduction in quotas for R22 and R141b is expected to improve the supply-demand structure for R22. Calculated quotas for R22 in 2026 are approximately: DONGYUE GROUP 43,000 tons, Zhejiang Juhua 38,100 tons, Meilan Chemical 30,200 tons, Arkema 8,600 tons, Zhejiang Sanmei Chemical Industry 7,700 tons. HFCs: Based on 2025 quotas, there are two opportunities for adjustment within the year, with the total adjustment ratio between different varieties not exceeding 30%. The Ministry of Ecology and Environment increased the production quotas for R245fa by 3000 tons (with a domestic production quota of 3000 tons) and R41 by 50 tons (with a domestic production quota of 50 tons) based on the demand for HCFCs alternatives and the growth demand for R41 in the semiconductor industry. The quotas for other varieties remain consistent with those in 2025. Adjustments to quotas are differentiated between adjustments within the same variety and adjustments between different varieties. Quotas within the same variety can be adjusted equally between different production units, while adjustments between different varieties must not increase the total CO2 equivalent and the cumulative adjustment increase should not exceed 30% of the allotted quota for a given variety, slightly higher than the 10% ratio from the previous year. The number of adjustments remains at two per year, with adjustment periods before April 30th and August 31st each year. Under the unchanged conditions of the quota system, production companies can adjust production more flexibly based on actual supply and demand, with companies that have a full range of varieties and higher quotas possessing greater flexibility in adjustments. After a decline, R22 prices stabilized, while the prosperity of mainstream third-generation refrigerants like R32 and R134a continued. With R22 gradually entering the off-peak season and maintenance demand shrinking after the replacement of old air conditioners, it is predicted that there may be excess R22 quotas within the year, prompting companies to clear inventory by reducing prices. According to Sublime China Information, the average price of R22 in Q3 2025 dropped to 34,100 yuan/ton, a decrease of 429 yuan/ton from Q2. As reported by Fluorine Online, R22 prices have fallen to 15,000-18,000 yuan/ton in October, with low prices driving market purchasing sentiment and shipments running smoothly, leading to prices stabilizing at 18,000-20,000 yuan/ton. R32 has shown strong performance, with refrigerant companies maintaining a strong willingness to support the R32 market as demand continues to grow. The average price for R32 in Q3 2025 reached 59,000 yuan/ton, an increase of 8,534 yuan/ton from Q2. Currently, the mainstream transaction price remains at 61,000-62,000 yuan/ton. Due to ongoing quota consumption, the average price for R134a in Q3 2025 rose to 51,000 yuan/ton, an increase of 3,360 yuan/ton from Q2, gradually rising to 53,000 yuan/ton. With the influence of high R32 prices, the average price for R410a reached 51,000 yuan/ton in Q3 2025, an increase of 2,830 yuan/ton from Q2, currently rising to 52,000-55,000 yuan/ton. Prices for R125, R143a, and R507 remained stable at 46,000 yuan/ton in the second and third quarters and currently. Recommendations It is recommended to focus on leading fluorine chemical companies with complete industrial chains, comprehensive infrastructure, leading refrigerant quotas, and advanced technological processes. Relevant companies include Zhejiang Juhua (600610.SH), DONGYUE GROUP (00189), Zhejiang Sanmei Chemical Industry (603379.SH), among others. Risk Factors Lower-than-expected demand for fluorine chemical products; policy risks (strictening environmental policies on fluorine refrigerants, accelerated upgrading processes, changes in quota distribution policies, etc.); global trade friction and export obstacles; a downturn in the real estate cycle; delays in company project progress; rises in raw material prices; risks related to chemical safety production, among others.