The 2012 letter said producers and importers combined cannot exceed 55 million pounds for 2012, a 45 percent reduction from 2011, while the EPA finalizes the rule. Many were expecting a further decline in 2013 but prices have sky rocket for R-22. In order to have an orderly transition, the 47% decrease in 2012 was viewed as excessive but the complete elimination schedule of virgin R-22 is still effective. Eventually R-22 prices could exceed $500/lb. and all supply will be reclaimed material. The EPA allotment of 63MM pounds for 2013 and 51MM pounds for 2014 which reflects the shortages in 2012. Elimination will require 10MM pound drops from 2014-19 and correspondingly higher prices for R-22. HDSN and Airgas are reclaimers. They have a profit margin based on cost versus market price. If R-22 prices decline form the current high, they will lower the payment for reclaimed material. I would think earnings will go up some in 2013 as HDSN's network has expanded but not as much as if shortages were as bad as 2012. The price of R-22 will again increase in 2014 and forward. Short term blip but hedge funds focus on tomorrow only.
So considering since spot prices have taken a dive, doesn't this place a bad taste in the mouths of those who invested capital recently to serve the market and doesn't it actually give them added incentive to pursue new equipment sales instead of repairing existing r-22 units?
Planned obselence with a little help from the EPA (by changing the rules mid-stream).
EPA is allowing greater virgin supply of R22 than anticipated, though it is still rather limited, it is a few million more pounds than last year. But remember, 2012 was cut in half, so price of R22 should stabilize.