Chemours ‘pulling out all stops’ amid R-454B issues, CEO says

“Stronger-than-anticipated” demand for R-454B has hit the supply chain, Chemours CEO Denise Dignam confirmed on the company’s Q1 earnings call last week. 

The big picture: In mid-April, Chemours announced a $2.85-per-pound price increase on all open R-454B orders expected to ship starting May 1, just days after Honeywell announced both a $4-per-pound increase on all new orders and a 42 percent surcharge, citing increased costs due to tariffs.  

What’s happening: R-454B demand “has been even higher than expected as stationary OEMs build inventories and experience increased sell-through demand,” Dignam explained. 

• This has created “pressure on various areas of the supply chain, noticeably around cylinders used to ship and transport the R-454B blend for stationary aftermarket sales,” she continued. 
• Under the hood: To address the cylinder issues, “we are increasing our line fill capacity in order to quickly fill cylinders as they arrive from our sources,” Dignam noted. “We believe the situation will correct itself quickly and will not be a long-term issue.”

Zoom out: While the company is nearly three years into a 40 percent capacity expansion at its Corpus Christi, Texas, facility, “We did experience a full site outage in January,” Dignam highlighted.

• Though it was “not ideal,” she clarified that it was related to a third-party utility provider and “did not have an impact” on the company’s ability to serve the market.
• “I want to highlight the impressive work from our team on site to quickly get our plant up and running, ensuring no disruption to filling our customer orders.”

What to watch: Dignam revealed that Chemours anticipates cost inflation around R-32, echoing Watsco CEO Albert Nahmad’s comments from two weeks earlier. 

• “[W]e’re starting to see allocations forming around R-32,” Nahmad said in late April. “The price spread between the two products now has narrowed to a little over $3 a pound.”  
• “[W]e’ve been working closely with our customers to better align our agreements to address this headwind inclusive of tariff exposure… As a result, we will be able to successfully offset these elevated input costs through our pricing going forward,” Dignam noted.

Looking ahead: When asked to clarify why she expects R-454B-related supply chain issues to resolve quickly, Dignam pointed out, “The last transition occurred 30 years ago.”

• “So, we’re learning as we go, but we are pulling out all the stops,” she concluded. “We’ve added additional shifts. We put in third-party operations, and we see this normalizing in the next couple of months.”