Guojin Securities: The Middle East situation does not affect core factors; refrigerants still have long-term logic.

Guotai Junan Securities pointed out that the regional conflicts in the Middle East, coupled with the situation in the Strait of Hormuz, do indeed impact the export of refrigerants and downstream air conditioning, but this impact is expected to be significantly compensated once transportation is resumed. Additionally, the influence of oil and gas prices is likely to further promote the penetration rate of domestic new energy vehicles, driving up the demand for automotive refrigerant R134a. It is estimated that the long-term logic of refrigerants remains unchanged, and it is still recommended to pay attention to leading companies in the refrigerant industry.

Full text as follows

Guotai Junan Chemical Chen Yi | The situation in the Middle East does not affect core factors, refrigerants still possess long-term logic

Investment Logic

The supply pattern of refrigerants serves as the core support for long-cycle price increases, with the long-term trend unchanged. Refrigerants, as a typical product type with strictly limited supply on the supply side, are among the few products that have experienced continuous improvement in long-cycle profitability. As the third-generation refrigerant industry has already passed the intense competition of the 2020-2022 baseline period, it has entered a stage of industry-controlled production:

① Enterprises that did not produce and sell during the quota period are unable to obtain production and sales quotas (unless they purchase quotas at a high price or through mergers and acquisitions);

② Existing production enterprises also face constraints on quota production and cannot freely and fully expand their current production capacity;

③ The industry supply pattern is evidently concentrated, with tail-end companies gradually eliminated during previous competition, and only a few companies are able to obtain quotas for production;

④ After more than two years of industrial chain sorting, the initial pricing model of the refrigerant link has fundamentally reversed. Refrigerants, due to their supply-side constraints, have significantly enhanced their pricing power within the industrial chain. During the slight price increase of downstream products, price sensitivity is manageable;

⑤ Currently, the third-generation refrigerants still serve as the main solution among multiple refrigerant scenarios, with no economically viable or mature alternative products expected in the short term. It is estimated that they can maintain a longer lifecycle compared to the second-generation refrigerants.

In summary, the long-term logic of refrigerants has not changed. The constraints on refrigerant production quotas that are implemented globally and domestically still exist, and 2026 marks the last year of the baseline period for the second group of developing countries’ hydrofluorocarbon quotas. In the future, more countries will enter quota constraints. Whether globally or domestically, supply restrictions on the production side still exist. Refrigerants continue to have top pricing power and quota barriers, therefore, from a long-cycle perspective, we remain optimistic about price increases for refrigerants. At the end of February, the refrigerant industry welcomed an overall price increase for the third-generation refrigerants in 2026, including a price increase of 1000 yuan for R134a, 500 yuan for R32, 1000 yuan for R125, and 500 yuan for R410. The refrigerant industry is about to enter the domestic demand peak season, and the overall price adjustment still has industry fundamentals.

In the short term, the export of refrigerants and air conditioning is slightly affected by the situation in the Middle East, but the impact remains controllable, and recovery is expected. The refrigerant and industrial chain have formed two types of export exposure: direct export of refrigerants and downstream air conditioning exports. As a high-temperature region, the Middle East is one of the terminal demand areas in the industrial chain, thus the short-term regional conflicts have indeed had some impact on the industry. On one hand, among the refrigerant exports from China, the Middle East, as one of the main demand locations, occupies a small proportion. In 2025, the export share of refrigerants such as R22, R32, R134a, R125/143a, and R410 to the Middle East is 9%, 2%, 14%, 11%, and 10% of the total export volume, respectively. Due to the localized conflicts and transportation restrictions in the Strait of Hormuz, there have been significant delays in the delivery of refrigerants to the Middle East; on the other hand, in the terminal air conditioning sector, due to its hot weather, the Middle East is a relatively concentrated area for air conditioning exports. In 2025, China’s exports of household air conditioners to the Middle East exceeded 17 million units, accounting for 20.8% of total exports, among which the core regions impacted by the war had an air conditioning export scale of 8.36 million units, accounting for 10.2% of total exports. Due to the situation in the Middle East, air conditioning export orders have declined.

The temporary transportation impact has created restrictions, but future demand rebounds and restocking needs are expected to compensate for some of the earlier impacts. Whether from the refrigerant or the terminal air conditioning sectors, the regional conflicts in the Middle East have indeed brought about temporary industry impacts. Refrigerant export orders have been delayed, and downstream production orders have slightly decreased, but rationally, this part of the orders is delayed rather than disappeared. The natural conditions in the Middle East make air conditioning a necessity, difficult to replace. In the early stages, local refrigerant manufacturers in the Middle East still had inventory. As this inventory is gradually consumed, it means that once transportation through the Strait is resumed, there will be a direct and rapid release of demand and noticeable restocking needs. Coupled with the reconstruction of certain bombed areas in the Middle East, the refrigerant and downstream industrial chain are expected to welcome a significant rebound in demand.

Investment Recommendations

In the short term, regional conflicts in the Middle East, combined with the situation in the Strait of Hormuz, do indeed impact the export of refrigerants and downstream air conditioning, but this impact is expected to be significantly compensated once transportation is resumed. Additionally, the influence of oil and gas prices is likely to further promote the penetration rate of domestic new energy vehicles, driving up the demand for automotive refrigerant R134a. It is estimated that the long-term logic of refrigerants remains unchanged, and it is still recommended to pay attention to leading companies in the refrigerant industry.

Risk Warnings

The risk of high oil prices suppressing demand, the risk of fluctuating policies promoting consumption, and the risk of further escalation of geopolitical conflicts, etc.

(Source: Yicai)