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Analysis of the "300% Price Increase" in Fluoroelastomer Market

R142b Refrigerant


Since the end of 2020, the price of fluoroelastomer has tripled. The primary raw material for fluoroelastomer, R142b, has surged from $3,000/ton in early 2021 to over $25,000/ton, and prices continue to rise. R142b is regulated under the Montreal Protocol, with production controlled through quotas, as its main downstream product is vinylidene fluoride (VDF).


VDF (Vinylidene Fluoride)

VDF is used to produce PVDF, fluoroelastomer (FKM), and fluoro resin, with R142b being a key raw material for FKM, making up about 80% of its composition.


PVDF (Polyvinylidene Fluoride)

PVDF prices have skyrocketed from $12,000/ton at the start of the year to over $120,000/ton. PVDF is widely used in lithium battery separators, electrode adhesives, and other applications. In the first half of 2021, demand for lithium batteries increased 1.78 times year-over-year, with estimated demand reaching 15,000 tons in 2021 and 23,000 tons in 2022. However, current supply stands at only 11,000 tons, and new PVDF production facilities take about two years to build, further widening the supply-demand gap.


FKM (Fluoroelastomer, F26)

FKM, made by polymerizing VDF and hexafluoropropylene (HFP), has seen raw material prices increase from $13/kg to $36/kg (1,000 NTD). Major international brands are struggling to supply FKM, leading to widening market gaps and depleted inventories, intensifying the shortage.


R22/R125 Fluorinated Refrigerants

The market for R22 and R125 refrigerants has rebounded rapidly, with prices surging by 100% and 80% respectively since late August. Rising costs for raw materials like fluorite and sulfuric acid have kept hydrofluoric acid prices high. As winter approaches, the difficulty of extracting fluorite increases, pushing hydrofluoric acid prices even higher.


TFE (Tetrafluoroethylene) Monomer

A "battle for resources" has escalated the cost of producing fluoroelastomer and related products. Fluorite, hydrofluoric acid, and R22 are raw materials for producing TFE, and their price increases are driving up TFE prices, which in turn are raising the costs of PTFE and fluoroelastomer products. Additionally, TFE is also used to produce R125 refrigerant, and the rising price of R125 is diverting more TFE monomers into the refrigerant sector, further reducing the availability of TFE for fluoroelastomer production.


Conclusion

Due to the significant impacts of factors like "carbon neutrality" and "carbon overage," the prices of raw materials for fluoroelastomers have surged dramatically. The "battle for FKM raw materials" has ultimately led to soaring production costs and reduced output. As a result, fluoroelastomer prices are expected to continue rising through Q4 2021.


KATON forecasts that the fluoroelastomer shortage will persist through 2021 to 2023, with prices continuing to increase until R142b production capacity is released in about two years.


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