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

Guojin Securities pointed out that in the short term, the regional conflict in the Middle East, together with the Strait of Hormuz, has indeed affected the export of refrigerants and downstream air conditioners, but this portion of the impact is expected to be clearly made up after transport is liberalized. In addition, the impact of oil and gas prices this time is also expected to further boost the penetration rate of China’s new energy vehicles, driving further upward demand for vehicle refrigerant R134a. The long-term “big logic” for refrigerants is still unchanged, and it is still recommended to focus on industry-leading refrigerant companies.

Full text as follows

Guojin Dahua’s Chen Yi｜The Middle East situation does not affect core factors; refrigerants still have long-term logic

Investment thesis

The refrigerant supply structure serves as the core support for long-cycle price increases; the long-term trend will not change. As a typical product whose supply side is strictly constrained, refrigerants are one of the few products whose long-cycle profitability can continue to improve. Since the third-generation refrigerant industry has already gone through the all-out competitive “benchmark period” of 2020–2022, it has entered an industry-controlled production stage:

① Companies that did not produce or sell during the quota period cannot obtain production and sales quotas (unless they purchase quotas at a high price or the company is involved in mergers and acquisitions);

② Existing production enterprises also have constraints related to quota production, and thus cannot freely and fully expand current production supply capacity;

③ The industry’s supply pattern is clearly concentrated. In the earlier competition, tail-end companies are gradually eliminated, and only a small number of companies are able to obtain quotas to produce;

④ After more than two years of sorting the industrial chain, the initial pricing model in the refrigerant segment has fundamentally shifted. Refrigerants have clearly increased their pricing power in the industrial chain thanks to constraints on product supply. As downstream products’ prices rise slightly, their price sensitivity remains controllable;

⑤ Currently, third-generation refrigerants are still the main solution in multiple refrigerant application scenarios. In the short term, there are no economically priced or mature alternative products. It is expected that, compared with second-generation refrigerants, third-generation refrigerants can maintain a longer lifecycle.

Based on multiple dimensions, the long-term logic for refrigerants has not changed. Globally, the quota constraints for refrigerant production in domestic implementation still exist. Moreover, 2026 is the final year of the quota benchmark period for hydrofluorocarbons among the second group of developing countries. In the later period, the number of countries entering quota constraints will further increase. Whether globally or domestically, supply limitations on the production side still exist. Refrigerants still have leading pricing power and quota barriers. Therefore, from a long-cycle perspective, refrigerants are still expected to see price increases. At the end of February, the refrigerant industry saw an overall price increase for third-generation refrigerants for 2026. Specifically, R134a quotations were raised by 1000 yuan, R32 by 500 yuan, R125 by 1000 yuan, and R410 by 500 yuan. The refrigerant industry is about to enter its domestic peak demand season, and the upward price adjustment still has an industry foundation.

In the short term, refrigerant and air-conditioner exports are affected slightly by the Middle East situation, but the impact remains manageable and is expected to be repaired later. Refrigerants and the industrial chain have formed two types of export exposure: direct refrigerant exports and downstream air-conditioner exports. As one of the terminal demand regions in the industrial chain, the Middle East is a hot region, so indeed the regional conflicts in the short term bring some impact to the industry. On the one hand, in China’s refrigerant exports, the Middle East, as one of the main demand destinations, accounts for a relatively small share. In 2025, the share of refrigerant exports to the Middle East was 9% for R22, 2% for R32, 14% for R134a, 11% for R125/143a, and 10% for R410, of total refrigerant export volume. This time, due to localized conflicts in the Middle East and transportation restrictions through the Strait of Hormuz, there have been large-scale delivery delays of refrigerants shipped to the Middle East. On the other hand, in the terminal air-conditioner segment, due to its hot weather, the Middle East is also a relatively concentrated region for air-conditioner exports. In 2025, the scale of China’s household air-conditioner exports to the Middle East exceeded 17 million units, accounting for 20.8% of total exports. Among them, the core areas affected by the war had an air-conditioner export scale of 8.36 million units, accounting for 10.2% of total exports. Affected by the Middle East situation, the export order backlog for air conditioners has declined somewhat.

The phased transportation impact creates a constraint, but later a demand rebound and restocking demand are expected to make up part of the earlier impact. Whether from the refrigerant side or from the terminal air-conditioner segment, regional conflicts in the Middle East have indeed brought phased industry impacts: refrigerant export orders are delayed, and downstream production order backlogs are slightly reduced. But rationally, part of these orders are being delayed rather than disappearing. The natural conditions in the Middle East make air conditioners necessary and difficult to replace. In the earlier phase, Middle East local refrigerant producers still have inventory. As the inventory is gradually consumed, this means that once shipping through the strait is reopened, it will lead to a direct acceleration in demand release and a clearly increased restocking need. Coupled with the reconstruction in parts of the Middle East following bombing in certain areas, in the future both refrigerants and the downstream industrial chain will still enter a phase of clear demand recovery and rebound.

Investment recommendation

In the short term, the Middle East regional conflict, together with the Strait of Hormuz, has indeed affected refrigerant exports and downstream air-conditioner exports, but this portion of the impact is expected to be clearly made up once transportation is liberalized. In addition, the impact of oil and gas prices this time is also expected to further boost the penetration rate of China’s new energy vehicles, driving further upward demand for vehicle refrigerant R134a. The long-term “big logic” for refrigerants is still unchanged, and it is still recommended to focus on industry-leading refrigerant companies.

Risk warning

Risks include: high oil prices suppressing demand, risks of policy fluctuations that promote consumption, and risks of further escalation of geopolitical conflicts.

（Source: First Finance and Economics）