Guosen: The production of air conditioners in the second quarter increased year-on-year, and the price of refrigerants continued to rise.

Guosen released a research report stating that in 2026, the compliance reduction of the second-generation refrigerants will be implemented, while the quota system for third-generation refrigerants will continue. High concentration of industry will be seen in varieties such as R32, R134a, and R125. The conversion ratio between third-generation refrigerant varieties is expected to increase year-on-year, leading to improved flexibility in production allocation for companies. It is predicted that the mainstream third-generation refrigerants will maintain a tight supply-demand balance in 2026. The bank believes that the tightening of refrigerant quotas is a long-term trend, and under this background, mainstream refrigerants such as R32, R134a, and R125 are expected to continue their prosperous outlook with significant upside potential in prices in the long term. Leading companies in refrigerant quotas are likely to maintain high profitability levels in the long run. Additionally, the bank sees positive prospects for the increase in demand for fluorinated liquids and refrigerants in the liquid cooling industry. It recommends keeping an eye on the price recovery of fluorine-containing high molecular substances such as PVDF and PTFE, as well as on leading fluorine chemical companies with complete industrial chains, comprehensive infrastructure, leading refrigerant quotas, and advanced technological processes. Key points from Guosen: March fluorine industry review As of the end of March (March 31), the Shanghai Composite Index closed at 3891.9 points, a decrease of 6.5% from the end of February; the CSI 300 Index closed at 4450.1 points, a decrease of 5.5% from end of February; the Shenwan Chemical Index closed at 4674.4 points, a decrease of 10.3% from end of February; the fluorine chemical index closed at 1942.3 points, a decrease of 13.6% from end of February. The fluorine chemical industry index in March lagged behind the Shenwan Chemical Index by 3.3 percentage points, underperformed the CSI 300 Index by 8.1 percentage points, and underperformed the Shanghai Composite Index by 7.1 percentage points. According to the bank's compiled Guoshin Chemical Price Index, as of March 31, 2026, the Guoshin Chemical fluorine price index and the Guoshin Chemical refrigerant price index were 1352.16 and 2030.67 points, respectively, up by 6.62% and 2.82% from the end of February. In March, prices of fluorite, anhydrous hydrofluoric acid, and some refrigerants rose to varying degrees. Long-term contracts and prices for R32, R125, R134a, and R410a have increased According to FluoroOnline and Sublime China Information, as of March 31, 2026, the second-quarter long-term contract price for R32 increased by 1000 yuan/ton month-on-month, with a price range of 6.25-6.35 yuan/ton. The transaction price of R22 has increased to 17,500 yuan/ton. The price of R125 increased by 2000 yuan to 51,000-57,000 yuan/ton; R410a/R404/R507 followed suit with price increases of 1000/1000/1000 yuan to 57,000/50,500/50,500 yuan. The price of R134a increased by 1000 yuan to 59,000 yuan/ton. According to Industry Online, the year-on-year growth rate of air conditioner production is expected to turn positive from May 2026 Production in January and February 2026 was affected by the Spring Festival holiday. The production of domestic air conditioners in March and April showed strong resilience, driven by demand for installations accompanying home purchases. The industry still has support from the fundamental factors, showing only a slight year-on-year decline against the background of high base from the previous year and continuous rise in raw material costs. With the arrival of the hot summer season, air conditioner production is expected to increase year-on-year in May and June. In terms of exports, production was mixed in January and February 2026 due to the domestic Spring Festival. The decrease in export production narrowed rapidly in March after the effects of the holidays faded, but due to the high base formed by concentrated overseas replenishment last year and the impact of the Middle East war on transportation costs, export production continued to decline year-on-year in March-April. In terms of domestic production, 12.7 million units of air conditioners were produced in April 2026, a decrease of 0.5% year-on-year; in terms of exports, 9.75 million units were exported in April 2026, a decrease of 12.2% year-on-year. Focus on rising prices of fluorinated polymers amid cost support and supply-demand improvement (1) Short-term costs for PTFE continue to rise, with raw material prices steadily increasing, elevating production costs for companies and providing a solid support for market price hikes. As of March 31, 2026, the price of suspension medium particles was 50,000-52,000 yuan/ton, suspension fine powder was 51,000-53,000 yuan/ton, dispersion resin was 50,000-54,000 yuan/ton, and dispersion emulsion was 30,000-32,000 yuan/ton. (2) The overall market situation for PVDF remains stable, with differentiated trends in various sub-categories: prices for coating grades remain stable; short-term tight supply for molded products, coupled with some companies reducing production due to maintenance, have led to a general price increase of 3000 yuan/ton; lithium battery grades are benefiting from the release of energy storage demand, with actual transaction prices gradually approaching official prices. As of March 31, 2026, prices were reported at 54,000-60,000 yuan/ton for coating grade, 56,000-60,000 yuan/ton for molded products, and 55,000-60,000 yuan/ton for lithium batteries. (3) FEP prices are expected to continue rising in the short term, supported by rising raw material costs, recovering downstream demand, and tight spot supply. As of March 31, 2026, extrusion materials were priced at 56,000-58,000 yuan/ton, and molding materials were priced at 68,000-73,000 yuan/ton. Fluorine chemical news this month Jinhua Yonghe's annual production of 8,800 tons of fluorine-containing high-performance materials technology upgrade project was announced; Changshu Sanai Fu's fourth-generation refrigerant project was announced; Zhejiang Sanmei Chemical Industry's fourth-generation refrigerant pilot project is expected to be approved; DONGYUE GROUP's net profit in 2025 increased by 102.49% year-on-year. Risk warning: Fluorine chemical product demand falls short of expectations; policy risks (strictening environmental policies on fluorinated refrigerants).