Prices for SF6 gas are also heavily determined by the changes in global fluorore supply. An example of this was a 12% decline in global fluorore production in 2021 due to a Chile mine strike that increased feedstock costs by 18%, further lifting SF6 gas prices to $42,000 per ton, a 25% increase over the 2020 peak. At the same time, China’s industrial power rates will increase by 7% in 2022 as the world’s largest SF6 producer, thus raising the cost of production of SF6 gas by about 800 yuan per ton. On the supply and demand side, with the boom in demand for European power grid upgrade in 2023, SF6 gas imports rose by 30% year-over-year, while global capacity rose by just 8% during the same time, and the gap between supply and demand widened to 150,000 tons, causing spot prices to rise above $51,000 / ton during the third quarter, a 10-year high.
Regulations and policies have non-linear effects on SF6 gas prices. The European Union’s Fluoridated Gas Regulation (F-Gas) requires an SF6 use reduction of 79% by 2030, resulting in quota allocation reductions to 45% of the base year in 2025, forcing European firms to purchase compliant products at a 20-30% premium price. For example, Siemens Energy of Germany will invest another 120 million euros in 2022 due to enhanced compliance, 35% of which will be research and development costs of SF6 alternatives. China’s “Power grid equipment Environmental Protection Technical Guidelines” specifically requires that the SF6 leakage rate of new substations in 2025 should be less than 0.5%/year, requiring companies to purchase high-end gas with 99.999% purity, and the price of such products is 40% more expensive than industrial-grade SF6 gas, promoting market segmentation development.
Substitution competition caused by technology is changing the price logic. The newly developed C5-FK gas mixture by General Electric in 2023, with just 3% of the GWP of SF6 and an increase of arc extinguishing efficiency by 15%, has already been commercially replaced in 30 132kV substations of the UK. Wood Mackenzie places the figure that 10% alternative technology penetration growth reduces sf6 gas price growth by 2.5 percentage points per annum. The current stock market of SF6 equipment is as high as $120 billion, the replacement cycle takes 15-20 years, and short-run inflexible support prices of demand. For example, 93% of the Power Grid Corporation of India’s 765kV GIS gear tendered in 2024 still uses the traditional SF6 insulation scheme.
Global trade tensions have increased supply chain realignment, which has driven price volatility higher. In 2022, the Sino-US tariff war increased the cost of cross-border transportation of SF6 gas by 28%, and the CIF price of 40 tons of high-pressure SF6 gas transported from China to the United States reached $68,000 / ton due to 25% punitive tariffs. At the same time, with the Russia-Ukraine war, European helium supply decreased by 60%, which affected the inert gas protection link required for SF6 gas production, so the utilization rate of Linde Group’s capacity during 2023 Q2 was reduced to 72%, and the inventory turnover days were extended to 48 days. These events caused SF6 gas prices to demonstrate an unnatural volatility of 14% for the year 2023, which was more than double the usual average of 6.5%.
Expansion of climate policy and carbon pricing mechanisms is redesigning cost dynamics. The EU Carbon Border Adjustment Mechanism (CBAM) pilot phase will include the notional carbon cost in the price of SF6 gas, and in full force from 2026, all SF6 imports will attract a carbon charge of €120 per tonne. French grid utility RTE estimates that this will add 18% to 22% to the price of buying SF6 gas in the EU market. After the price of China’s carbon emission rights market reaches more than 90 yuan/ton in 2024, domestic SF6 manufacturing firms’ purchase price of the carbon quota takes up 9% of their overall production costs, an increase of 5 percentage points from that of 2020, and these externalities will eventually be transferred to the tail end of SF6 gas prices by 60%-75%.
Power equipment energy efficiency standards upgrade to induce quality premium differentiation. The International Electrotechnical Commission (IEC) 62271-203 standard 2024 established the SF6 gas water content maximum value for GIS equipment from 150ppm to 50ppm, allowing the ultra-pure gas market share with 99.9995% purity to grow from 32% in 2021 to 58% in 2024, and its price premium space to hit 28%. For example, the acquisition of high-quality SF6 gas by Shandong Taikai Electric in 2023 rose by 65% year on year, and the acquisition of industrial grade fell by 40%, and such a structural change has expanded the price difference between different grades of SF6 gas from 8,000 yuan/ton in 2020 to 23,000 yuan/ton. As the Global Energy Internet Development Promotion Association predicts that demand for SF6 gas for UHV equipment will account for 75% of the total in 2025, the price power of such high-end products is being concentrated in players such as Showa Denko, Japan, which owns the core purification technology, further strengthening the market oligarchy.