The Canadian refrigerant gas supply chain is very regulated, complicated, and dependent on several external factors. With the transition from high GWP HFC refrigerants to low GWP HFOs and HFC/HFO blends there is further complexity and supply chain concerns. The refrigerant gas industry in Canada is evolving rapidly, driven by regulations, innovation, sustainability, and economics.
The countries that manufacture the largest volume of the refrigerants worldwide are China, USA, India, Japan. Refrigerant gas sold in Canada originate mostly from China and USA manufacturers.
Canada, USA, and China’s regulations require that the company or person which exports or imports HFC refrigerant gas have assigned allocation for the country when crossing boarders.
In Canada, under the Ozone-depleting Substances and Halocarbon Alternatives Regulations (ODSHAR), every person must receive written authorization from the Minister of Environment and Climate Change Canada prior to manufacturing, importing, or exporting a HFC refrigerant substance.
There are currently no allocation regulations in place for the import or export of HFOs for Canada, USA, and China.
The main chemical building blocks for refrigerants is fluorspar, hydrofluoric acid, and hydrocarbon chemical feedstock. Supply of fluorspar into the USA is supplied by Mexico, whereas historically, China had been the leading supplier. Fluorspar will remain in demand in the USA as manufacturers transition to producing HFOs, and the fluorspar supply is stable. This is very much a subject of concern as the USA may be implementing tariffs on Mexican imports as they currently have in place for China. This would have a significant cost increase in the USA produced HFOs in the future and impact the Canadian market cost.
In recent years, USA manufacturing has closed HFC production facilities, moving away from high GWP HFC refrigerants to lower GWP HFO and HFC/HFO blends. The blends require the import of HFCs from China resulting in a higher cost.
The leaders in intellectual property and production of HFO refrigerants are U.S.A. based companies. The USA is positioned to be a major production center for advanced refrigerants, which include HFOs and their blends. China has aggressively expanded production of HFC refrigerants for domestic use as well as export to the USA for use in HFO/HFC blended refrigerants. The refrigerant blending of HFO/HFC is done in the USA, then exported to Canada or used domestically in USA.
Canadian regulation requires that refrigerant gas must be sold in refillable cylinders. This adds complexity to the supply chain in Canada, as the USA and China currently use single-use cylinders. Companies doing business in Canada have a dedicated finite number of cylinders for the Canadian market. This finite number can have an impact on the ability to supply specific types of refrigerants and quantities that the Canadian Market demands. Due to the USA market demand over the Canadian refillable cylinder demand, the USA market typically fulfilled first, and then Canada supplied. This is based upon forecasting and packaging schedules for individual plants. We will write more about cylinders in a future article as well as the reverse planning for empty cylinders.
HFC refrigerants imported into Canada are mostly from China and USA. Bulk ISO containers from China can take 2-4 months or longer to import into Canada. Currently no refrigerant cylinders are imported from China into Canada, as they do not use refillable cylinders which meet Canadian regulations. The bulk ISO containers from China are packaged into compliant refillable cylinders by companies located in Canada. Currently there are five companies which have this capability to pack HFC A1 refrigerants and warehouse them for sale and distribution. All these companies currently have various amounts of allocation to import HFC refrigerants into Canada. The time for HFC permits to be approved by USA for shipping HFC into Canada is typically two weeks. The lead time to fulfill HFC refrigerant orders is very much dependent on the prompt completion and approval of these permits.
HFO and HFC/HFO blended refrigerants imported into Canada are supplied from the USA. These are packaged products in compliant refillable cylinders. They are packaged in the USA due to patents and licensing agreements from the intellectual property owners which decide how these are sold in the Canadian market. As a number of the HFO and HFC/HFO blends are A2L flammable, there is limited current capability to package these A2Ls in Canada. There are instances where HFC/HFO A1 refrigerants have been imported into Canada in bulk ISOs by patent holders and sold and then packaged into the Canadian market by other refrigerant companies. This has provided cost effective and superior availability to the Canadian market for these refrigerants.
I would like to mention one specific refrigerant R-32. This is a HFC, low GWP, A2L flammable refrigerant which will be used to replace R-410A in some new A/C systems. R-32 does not have any patent and licensing restrictions for sale in Canada. If you work with R-32 systems, you will want to pay attention to the future capability to package this A2L product in Canada that may offer similar capability for other HFO and HFC/HFO A2L blends. The ability to package these refrigerants in Canada will help to streamline the supply chain, reduce cost, and better serve the Canadian market.
Warehousing and transportation are a major cost in the supply chain of refrigerants in Canada. This also adds complexity with cross-border transportation and required paperwork. HFO and HFC/HFO blend cylinders can travel from southern USA to Ontario then to British Columbia / Newfoundland and Labrador and destinations in between. HFC refrigerant cylinders can have a similar transportation path, but they can also be packaged from bulk ISOs and the cylinders distributed from Canada. It makes sense that the closer to market the more efficient the cost structure would be and minimize the carbon footprint of transportation at the same time.
As one can see, the supply chain is very regulated, complicated, and dependent on several external factors. The best way to ensure your supply of refrigerants are resilient, efficient and there when you need them in Canada, is to communicate on your current and future refrigerant requirements to your supplier. The supplier would then have the information needed to have correct forecasting and planning for their warehousing, packaging and production. This is a major challenge with the current phase down of HFC and transition to lower GWP refrigerants. It is critical that you communicate, ask questions and monitor the market closely to protect your customers from unplanned shut down due to refrigerant supply.
