hfos the new generation of fluorochemicals
TRANSCRIPT
Linden Tree Partners, LLC Presentation to:
Industrial Minerals Events
Fluorspar 2013 October 30, 2013
HFOs – The New Generation of Fluorochemicals
HFOs – The New Generation of Fluorochemicals
• Linden Tree Partners – Who We Are/What We Do (quick, we promise!)
• Some HFO Basics
• It’s Not Easy Being Green
• What Happens Next?
• Discussion
Linden Tree Partners: A New Consulting Model
The Linden Tree –
hearty across the globe,
rapid growth,
reaching great heights,
lasting for centuries
and symbolic of wealth creation,
discretion and common sense.
The Linden Tree signifies
enterprises at their best.
-
• Global network, language & cultural skills
• Natural resource value chains – from specialized end-uses backward
– Oil/natural gas
– Mined resources: metals and others (including global fluorspar value chain)
– Agriculture/Arboriculture and Other Renewables
– Water
Large firm strategy/operations analytics +
Industry consultancy content +
Operating company executive action =
Fast Results / Pragmatic Solutions
What Are Hydrofluoroolefins = HFOs?
• Refrigerant and Blowing agent
– Foams: one component
– Aerosols: novelty, lawn & garden
• Lower vapour pressure than HFC-134a
• Short atmospheric lifetime HFO 1234ze
1,3,3,3 Tetrafluoropropene ODP=0, GWP=6
HFO 1234yf 2,3,3,3 Tetrafluoropropene
ODP=0, GWP=4
• Refrigerant
- Mobile air conditioning (MAC)
- Retail & Institutional coolers
• Short atmospheric lifetime
- 11 days vs. 13 years for R-134a
What’s At Stake
Estimated Global HFC Consumption 2012
(MMTCO2eq.)
Developed Region MAC Refrigerant Market
2012
Refrigerant (134a basis)
Fluorspar
Refrigerant (134a basis)
Fluorspar
Volume (KTA)
200
100
0
Refrigeration/AC
Foam
Aerosol
Fire Extinguisher
Solvents
Decades of Refrigerants Industry Innovation: Focus on Safety & Environment
1950s HCFCs
1970s
1980/90s HFCs
Pre-1930
1930s CFCs
Focus: effective cooling Compounds: Ammonia, Methyl Chloride, Sulfur Dioxide Issues: Toxicity and Flammability
Focus: Reduced Toxicity and Flammability Risks Introduction of CFCs
Focus: Reduced Environmental Impact/Ozone Depletion Discovery of CFC contribution to ozone depletion
Focus: Reduced Environmental Impact /GWP Montreal Protocol (1987 – CFC/HCFC) Kyoto Protocol (1997- HFC)
Focus: Reduced Environmental Impact/GWP Continued refrigerant phase outs – developed and developing countries
Focus: Reduced Toxicity Introduction of HCFCs
2000s HFOs
HFO Innovation: Focus on Environment & Safety – Or Not?
2006 17 May: Directive 2006/40/EC issues for mobile air conditioning with objectives of controlling leakage of fluorinated greenhouse gases with >150 GWP and prohibiting from a certain date MACs using those gases 2012
22 June: HFO-1234ze US EPA VOC exempt 25 September: Daimler announces refusal to use HFO-1234yf in vehicles 26 September: DuPont responds blaming Daimler 3 October: Honeywell responds similarly to DuPont 10 October: Mercedes Benz begins recalling SL class vehicles with HFO 1234yf to rebuild with R134A 11 October: Mercedes Benz and Honeywell meet – Honeywell ask MB to review designs 23 November: EU indicates to MAC suppliers that after 31 December EU member states cannot allow registration of any subject vehicles containing R134A 13 December: Daikin announces intention to use HFC 32 in its air conditioners – “– “the next generation refrigerant is not something that can be decided upon just based on the inclinations of the refrigerant producers alone. As the only manufacturer involved in all phases from refrigerant development to development of air conditioning equipment, Daikin considers HFC32 to be the most suitable refrigerant for split air conditioners and heat pumps…” Balance of Year: VDA and ACEA debate required to estimate risks and take any countermeasures 31 December: After this date, 2006/40/EC requires MAC refrigerants with GWP<150 to be installed in subject vehicle platforms
2013 7 February: Daimler, Audi and BMW leave the SAE R-1234yf CRP team indicating in their view that tests performed are insufficient to fully judge vehicle safety 14 February: According to German ASP, German KBA safety authority will put pressure on Mercedes Benz to ensure vehicles sold use HFO 1234yf 5 March: BMW announces electrical i3 will be equipped with 1234yf 6 March: Daimler announces it has decided on CO2 for MAC. Honeywell describes as desperate attempt to further delay 28 March – EU VP Tajani states no legal grounds to approve an exemption and states intention to take action against any Member State who fails to enforce the directive 3 April - - Opel conducts test and no flammability 14 June: EC grants Germany 10 more weeks to demonstrate safety concerns re HFO-1234yf or comply, threatening infringement proceeding otherwise 21 June: SAE CRP group (absent German automakers) re-endorses safety of HFO 1234yf 16 July: Honeywell announces HFO1234yf has GWP less than CO2 27 August: France top administrative court issues temporary injunction lifting sales freeze on noncompliant Mercedes models until definitive ruling 27 August: Toyota Deutschland reportedly announces plans to revert to R134A for three models, joining Mercedes Benz. States “no consensus” and desire to “dispel any possible concerns our customers might have” 28 August: Daimler announces France has lifted suspension until definitive ruling has been given (estimate 12 months) 22 October: DuPont calls on German and EU authorities to bring closure to HFO 1234yf safety issue 29 October: DuPont announces separation of Performance Chemicals division in tax-free spinoff
“When Bad Things Happen to Good People”
LEADER Nonmarket
Strategy
Economics Psychology Ethics Political Science
“Born under a lucky star” “The best or nothing”
“The perfect combination of fascination and responsibility”
Market Strategy
“We are building a world that's safer and more secure … More comfortable & energy efficient …More innovative & productive.”
“The miracles of science.”
“Better things for better living”
The Mercedes Moose vs. Toyota Sudden Acceleration
Company/Event Share Price
Drop (%)
Share Price Drop
($B)
Market Cap Equivalent
Reputation Event Year
Toyota – Sudden Acceleration
24% 33 Time Warner 2004-2010 plus ongoing
lawsuits
BP – Deepwater Horizon
50% 90 P&G 2010
Used with permission of Daniel Diermeier EXPERTISE
TRANSPARENCY COMMITMENT
EMPATHY
Possible Substitutes: Natural Refrigerants?
Refrigerant ODP GWP
CFC High High
HCFC Low High
HFC Zero Moderate
HFO Zero Low
HC Zero Low
CO2 Zero Negligible
Helium Zero Negligible
Ammonia Zero Zero
STATIONARY REFRIGERATION MOBILE AIR CONDITIONING
CO2?
So What Happens from Here?
Consideration Issues/Considerations
Regulatory Requirements/Stance Ever more stringent but with focus on voter needs/economics especially in developed geographies
HFO Product Development Customer desire for global solutions: refrigerant relatively small cost of finished good/service total cost of ownership
Development of HFO Substitutes Total cost of ownership/total functionality – equipment versus refrigerant trade offs
Fluorochemical Reputations Long development lead times in rapidly shifting environment for mature industry. Patent landscape more complex than in “Teflon era”
Automotive Reputations Focus on consumer purchase criteria/global vehicles – environmental important to only a small, select customer group today
Consumer Reaction “Who cares?” – unwillingness to pay more today for lesser environmental impact
Environmental Activism Murky – fight on or shift to different category?
Range of Possible Impacts on Fluorspar Demand
Scenario Description Impact on Spar Demand
Winter Solstice (It Gets Brighter from Here)
Full HFO MAC Adoption
Deutschland Uber Alles Germany Opts Out
Summer Solstice Europe Opts Out and Change Impetus Weakens Elsewhere
Bubbly World MAC Transition to CO2