Corrected: US Chemours fights black-market HFCs being imported in the EU

Al Greenwood

02-Aug-2019

Correction: In the ICIS article “US Chemours fights black-market HFCs being imported in the EU” dated 2 August 2019, please read in the 13 paragraph … That’s like putting another 20m vehicles on the road … instead of … 5m-6m … A corrected article follows.

HOUSTON (ICIS)–Illegal imports of hydrofluorocarbon (HFC) refrigerants from China to the EU are hurting sales of legitimate material and slowing down the adoption of a new generation of materials, US-based Chemours said on Friday.

The company has hired an investigation firm to track down the sources of the imports so it can share the information with EU authorities, said Mark Vergnano, CEO. He made his comments during an earnings conference call.

HFCs are powerful greenhouse gases, and the EU is using a quota system to phase them out of air conditioners used in buildings. This system sets a quota for the import and production of HFCs.

However, some EU companies are buying black-market HFCs to save money and avoid the expense involved with switching over to hydrofluoroolefins (HFOs), Chemours said.

HFOs are much weaker greenhouse gases. Chemours makes HFOs and sells them under the brand name Opteon.

Illegal HFCs slow down the adoption of HFOs, Vergnano said.

They also lower the price and volumes of legitimate HFCs, which Chemours also makes, he said.

The influx of black-market imports in Europe is causing a ripple effect that is hurting sales in the US, Chemours said. Since EU customers are buying illegal material, HFCs that would normally be sold there are being shipped to the US, he said. As a result, US prices and volume have fallen.

The problem is big. Chemours estimates that 20-30% of the total EU quota is being offset by illegal imports of HFCs.

Partly because of the illegal HFCs, Chemours has lowered its 2019 guidance for adjusted earnings before interest, tax, depreciation and amortisation (EBITDA). The latest guidance is $400m lower. Out of that amount, the illegal HFCs account for $125m.

The damage goes beyond Chemours’s bottom line.

Since customers are buying the HFCs on the black market, they are avoiding taxes and depriving EU governments of revenue.

On the environmental front, Chemours estimates that using illegal HFCs has the same greenhouse effect as adding 20m-30m tonnes of carbon dioxide (CO2), said Mark Newman, chief operating officer. That’s like putting another 20m vehicles on the road.

To encourage more enforcement from regulators, Chemours is stressing the effects that these illegal imports are having on the environment and on tax collection, Newman said.

The company wants the EU to standardise, strengthen and enforce the penalties for using illegal HFCs, he said.

Looking at HFO adoption worldwide, new US automobiles should convert by 2021 and Japan by 2023, Chemours said. EU automobiles have already switched over.

For air conditioners used in buildings, Chemours continues to add new equipment partners, Newman said. This should speed up the adoption of HFO refrigerants.

HFOs are also being adopted as blowing agents, which are one of the main components that are used to make polyurethanes.

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