Recently, our wholesale partners have been asking us how a reclaimer can offer their customers $6.00 per pound for recovered R-22. The answer is found in the details of competing reclamation programs, transaction costs and an analysis of the refrigerant recovery market.
Payment Schedules
DynaCycle’s payment schedule has the broadest tier-one purity level (97%-100%) in the industry and pays on purity-levels as low as 90%.
Three reclaimers are offering the $6.00 per pound buyback program at this time. Their average purity-level to get a $6.00 payment is 99.5% and above. In addition, they charge a shrinkage fee (5-10%) to account for the lubricants and other impurities, which further reduces the amount paid. Here is an average of several payment schedules from competing reclaimers. This payment schedule illustrates how quickly rates can drop when purity-levels go below 99.5%.
99.5-100% $6.00 (net $5.40 with 10% shrinkage fee)
99.0-99.4% $4.00 (net $3.60 with 10% shrinkage fee)
98.5-98.9% $2.00 (net $1.80 with 10% shrinkage fee)
98.0-98.4% $1.00 (net $0.90 with 10% shrinkage fee)
Transaction Costs
While reclaimers will accept 50# cylinders, most prefer to have the gas delivered in 120, 240 or 1000 pound cylinders. This requires the contractor to transfer gas at their shops and then prepare the cylinders for delivery. The more gas that is transferred, the better the opportunity for diluting the refrigerant and driving down purity levels.
We did a quick study on the locations we visited that transferred their recovered R-22 into larger cylinders. We found that half of the tanks contained gas that was 97% pure while the other half was either mixed gas or less than 97% pure. Utilizing the payment schedule above, half of the transfer tanks would have no payment value. Conversely, the DynaCycle 50 lb. cylinders yield an average of 84% tier-1 and 11% tier-2 R-22 refrigerant (The remaining 5% is other refrigerants and mixed gas). That means you and your customer can get paid 95% of the time.
Market Conditions
Over the last year, we sampled hundreds of thousands of pounds of recovered R-22 that came in to our program. We found that the average purity level was 98.53%, and it has been falling throughout 2012 as the price of R-22 has increased. There has been an increase in the number of commercial system owners reusing the R-22 that is recovered during maintenance, instead of replacing it. R-22 that is recovered from larger commercial systems acts as a source of high-purity R-22 that increases the overall average purity-levels of recovered R-22. Should this trend continue (and we think it will) the average purity of recovered gas will fall below 98% in the near future.
Competitive Analysis
Back to the original question…How much will your customer actually get paid for the gas they ship off to the reclaimers offering $6.00 per pound. It is impossible to say exactly for each of your customers. What we do know is that the average purity-level for recovered R-22 is 98.53% which yields a payment of $1.80 to $1.90 per pound ($2.00 less the 5-10% shrinkage fee).
So is the competition’s $6.00 figure false advertising? No. Those programs inform the market about their purity-based payment schedule. What they don’t tell your customers is that the average of R-22 reclaimed is 98.53% pure.
Some may say that their average is higher than our survey. That is possible. However, logic would dictate that the difference is very small. The average purity-level of recovered R-22 does fluctuate. Our numbers show that this average is driven by the cost of R-22. The higher the cost, the lower the purity level of recovered R-22.
The DynaCycle Advantage
DynaCycle’s advantage comes from a competitive payment schedule that is properly aligned with market conditions, and an innovative, lightweight 50 lb. composite recovery cylinder. Here are some other advantages you can share with your customer:
84% of the total gas on the DynaCycle program is tier one (97-100%) Which means they would receive 28% of the Market Price or $3.36 per pound vs. an average of less than $1.90 (remember the shrinkage fee) with the other programs.
You offer convenient wholesale branch drop-off locations so your customers don’t need to transfer gas in their shop and ship their recovered R-22 to a distant location.
Using the lightweight DynaCycle cylinder yields twice as much gas per cylinder than a steel cylinder.
The unique design of the DynaCycle cylinder makes recovering R-22 faster easier than a steel cylinder.
You always get your own cylinder back from your wholesaler.
Your customers do not have to use their credits to buy R-22. They can use the money from their efforts to purchase anything they need for their business.
Your customers have 100% of their EPA paperwork done at no charge under the DynaCycle program.
Your customers are welcome to watch the testing of their R-22 before we pump down their cylinders and buy their recovered refrigerant.
3.9% Increase Annually Through 2016