China-US alliance to spark an evolution in acidspar demand

By Andrew Miller
Published: Thursday, 18 July 2013

Report: the future for fluorocarbons - Sino-American coordination targets ozone depleting HFCs, but what does this mean for fluorspar consumption? Andy Miller, junior analyst at Industrial Minerals Data investigates

Long-term growth projections for the acid-grade fluorspar (acidspar) market are likely to require revision in the wake of plans being developed by the world's two biggest economies to reduce hydrofluorocarbon (HFC) emissions.

Multilateral coordination between the US and China, who together account for up to two-thirds of global HFC production, will reshape acidspar's largest end-market as the two nations oversee the move from ozone depleting HFCs to more environmentally friendly replacements.

The fluorocarbon market accounted for 45% of total acidspar consumption in 2012 (1.71m tonnes), however demand from the sector has stagnated in recent months. This has had a substantial impact on acidspar production which fell by 5% in 2012.

A lull in demand accompanied by turbulence in the global economy has incited continual acidspar price decreases, leaving a number of prices rooted at their lowest point since mid-2010.

Similarly bleak short-term market forecasts undermine the prospects of any immediate upturn in the industry, with IM Data sources suggesting a recovery is unlikely before Q4 2013 at the earliest.

Although the promise of restrictions in the fluorocarbon market is unlikely to starve this eventual recovery in the short term, political pressure alongside the existing Montreal protocol framework promises to redefine the HFC market going forward.

Environmental objectives

Coordination between the US and China will be conducted through The Montreal Protocol on Substances that Deplete the Ozone Layer, a treaty established in 1989 to phase out the production of materials responsible for ozone depletion, notably halogenated hydrocarbons.

Efforts to tackle the production of these substances have dictated the direction of the fluorocarbon industry and subsequently the potential size of the acidspar market for over two decades.

Following the successful suppression of chlorofluorocarbon (CFC) and hydrochlorofluorocarbon (HCFC) production, the Montreal protocol is now being redirected towards HFCs due to their high global warming potential (GWP).

The White House has stated that a multilateral downscaling in HFC production could lead to a reduction of emissions by up to 90 gigatonnes of CO2 equivalent (GtCO2e) by 2050.

Considering that in 2010 HFC emissions were only thought to be 760 MMt GtCO2e, plans are clearly being put in place to mitigate an expected surge in output over the coming decades.

The United Nations Environmental Programme (UNEP) estimates that total greenhouse gas emissions will increase from 50.1 GtCO2e in 2010 to 58 GtCO2e by 2020. Emissions attributed to fluorinated gases (f-gases) as a proportion of this total are expected to grow from current levels of around 2%, meaning annual f-gas related emissions will exceed 1 GtCO2e by the end of the decade.

Despite these growth forecasts international pressure on the industry to reform is expected to have some impact on the profile of the market if not the size. Just as the suppression of CFCs and HCFCs fostered greater HFC production, so too will Sino-American cooperation to reduce HFC output lead to the introduction of chemical alternatives.

The form these chemicals take will define whether an evolution of the market will be to the benefit or detriment of the acidspar industry.

Global warming potential of HFCs

Species Chemical Formula Lifetime (years) 20 years 100 years 500 years
CO2 CO2 variable* 1 1 1
Methane** CH4 12 ±3 56 21 6.5
Nitrous oxide N20 120 280 310 170
HFC-23 CHF3 264 9,100 11,700 9,800
HFC-32 CHF2F2 5.6 2,100 650 200
HFC-41 CH3F 3.7 490 150 45
HFC-43-10mee C5H2F10 17.1 3,000 1,300 400
HFC-125 C2HF5 32.6 4,600 2,800 920
HFC-134 C2H2F4 10.6 2,900 1,000 310
HFC-134a CH2FCF3 14.6 3,400 1,300 400
HFC-152a C2H2F2 1.5 460 140 42
HFC-143 C2H3F3 4 1,000 300 94
HFC-143a C2H3F3 48.3 5,000 3,800 1,400
HFC-277ea C3HF7 36.5 4.300 2,900 950
HFC-236fa C3H2F6 209 5,100 6,300 4,700
HFC-245a C3H3F5 6.6 1,800 560 170

*Derived from the Bern carbon cycle model

**The global warming potential for methane includes indirect effects of tropospheric ozone production and stratospheric water vapour production

Source: United Nations Framework Convention on Climate Change (UNFCCC)

GWP is expressed relative to CO2. The time horizon variables therefore signify the equivalent CO2 emissions that 1 tonne of a respective chemical will have over a specified time period. Chemical emissions throughout the time horizon depend on its average lifetime, after which point an increasing amount of the gas is destroyed.

Source: International Energy Agency

A new generation: what will replace HFCs?

Industry experts have told IM Data that many potential out-of-kind substitutes for HFCs (e.g. non-fluorinated refrigerants such as CO2, butane, ammonia etc) still have problems with toxicity, flammability or alternative environmental side-effects.

Consequently, any feasible reduction in HFC emissions is expected to involve the use of in-kind substances (i.e. fluorinated chemical compounds) to supply commercial markets, which will require either equal or greater levels of fluorine input.

This evolution is already underway prompted by various regional policies which have targeted HFCs with particularly high GWP.

International guidelines, such as the European Mobile air-conditioning systems (MACs) directive, have focussed their attention on high emission f-gases. As a result, major producers have already begun reducing their output of many HFCs and adopted alternative halogenated hydrocarbons with lower GDP such as HFC-32, which is being used in place of HFC-125.

Similarly HFC-134a, which was introduced to replace the CFC dichlorodifluoromethane, has also come under scrutiny. Although pressures to phase-out the chemical have prompted a shift away from HFCs in this particular sector, alternatives have arisen in the shape of hydrofluoroolefins (HFOs). Despite these chemicals being derived from a different compound, they remain gases which naturally require fluorine as a feedstock.

International demands have therefore begun, and will continue to, create a more fragmented market; however the overall effect this will have on acidspar demand from the fluorocarbon industry shows little sign of being detrimental.

Instead, the size of the industry and its subsequent demand for acidspar will continue to be more immediately dependent upon the industries' historic driving force; economic growth.

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Regulation limitation

As the global economic crisis subsides, growth in fluorocarbon output will follow due to the interdependence of demand with GDP growth and particularly the processes of industrialisation and urbanisation.

Fluorocarbon production, as with the majority of fluorspar's end uses, is extremely sensitive to growth in downstream markets.

Substantial expansion of the market relies directly on income growth which feeds demand for fridges and air conditioning units.

Consumption of upstream materials such as fluorspar depends on the economic progression of the lower classes in vastly populated developing nations such as China and India. The emergence of a middle class with money to spend is therefore the primary fuel for the industry.

The relative impotence of market restrictions compared to these economic pressures has been exemplified by the growth in fluorspar production over the past decade in the face of substantial environmental regulations.

Acidspar production has increased 35% in the last ten years despite pressure from the Montreal and Kyoto protocols which have succeeded in minimising CFC and HCFC production, once major sources of acidspar demand.

A lack of viable alternatives has always previously insulated the acidspar industry from these pressures and this promises to continue for the foreseeable future.

This will only hold true if the refrigerant and air-conditioning sectors continue to use fluorinated gases. Fluorspar markets are likely to benefit from the economic recovery leading up to 2020, however upheaval of the fluorocarbon market is a constant threat to the industry's outlook.

For now at least, environmental restrictions look set to provoke an evolution to chemical alternatives rather than a revolution away from the use of fluorine based compounds.

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