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Supply chain caught up as “unprecedented” refrigerant costs bite

The continuing scarcity of the refrigerants R134a and R125 – used in many common refrigerant blends - is leaving wholesalers having to make price adjustments on a monthly basis.

The problem - particularly hitting the R400 blends - has resulted in a near-doubling of prices since January 2010. But refrigerant suppliers say they are just passing on producer costs, which are have sometimes gone up weekly.

Mark Henderson managing director of wholesaler FSW said he had never seen such regular price hikes. “This is quite extraordinary,” he said. “I have certainly not seen anything like this in the past. Usually we have a price for the whole year. So we are having to take some special steps, like buying from alternative sources or buying at a significantly higher price.”

Refrigerant distributors A-Gas, Harp and IDS have all said they are raising prices monthly and issuing letters to wholesale customers explaining the hikes.

Peter Dinnage, IDS commercial manager, said the firm was absorbing as many of the price increases as it could. But he added there would inevitably be pain all the way down the supply chain.

“We are being given new prices on a weekly basis from our suppliers. And it is not a negotiation, it is a question for us of take it or leave it.”

“The prices we pay have gone up by 95 per cent since January. Our margins are so small, we can’t absorb it. We are now paying as much for these chemicals as we were selling it for just a few months ago.”

In a letter to wholesalers, Mr Dinnage wrote: “On some products, in particular R134a, you will already be aware we have started to allocate product based on your 2010 forecast or 2009 off-take. Any new enquiries from those who did not purchase from us are being turned away irrespective of the price they are willing to pay.

He continued: “We will supply what we can at existing prices, but once our current stock is sold, we will need to apply new prices, which you will see from the attached letter will be at a significant premium. If we need to allocate the limited stock available to us before new prices apply, this will be advised to you before despatch. Therefore please expect a price increase of up to 30 per cent to apply on most products over the next few weeks.

Mr Dinnage concluded that circumstances are beyond the distributors’ control: “Our priority has to be to secure supply, which at the moment is incredibly fragile and not guaranteed.”

A-Gas managing director Jon Masters said: “We have  all seen shortages before,, but we have not seen anything that lasts so long and goes so deep.”

John Davey, Harp commercial director said the days when customers could make an order on one day, and expect to get the product the next were over for the foreseeable future.

“I have never seen anything any way near this,” he said. Wholesalers were already being given allocations, pro rata depending upon how much of the chemicals Harp was able to get its hands on, he said. “’Ordering doesn’t exist at the moment, and I can’t see that changing before the end of the year.”

Mr Davey warned that Harp’s customers would be getting another letter at the end of June, explaining August price rises, and informing them of their allocation, he said.

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