The prime reason for SF6 gas’s expensive price is its complex production process and strict environmental policies. According to the 2023 industrial gas market analysis of the world, SF6 synthesis needs to be carried out in a high temperature of 500°C and a high pressure of 20MPa with more than 10 times energy consumption compared to nitrogen production, and the cost of production per ton as much as 18,000 to 22,000 US dollars, while the cost of production of the same amount of carbon dioxide is only 3% to 5%. Additionally, the EU’s F-gas Regulation demands a 67% reduction in SF6 use by 2030, resulting in a 30% reduction in supply on the European market and a 45% increase from 2020 to an all-time high sf6 gas price of €130 / kg in 2022. For example, German industrial gas giant Linde Group reduced its annual SF6 capacity from 8,000 tons to 5,500 tons due to compliance with the redesign of the production line, driving the price standard deviation of $25 / kg, much higher than conventional gases such as argon ($8 / kg).
The cost of green disposal also adds to SF6 prices. SF6 possesses a global warming potential (GWP) 23,500 times greater than CO2, and businesses are responsible for the recovery and destruction cost of 12,000 euros per ton, along with fines for leakage rate excess up to 5% of annual revenue (e.g., EDF was fined 3.2 million euros for 0.3% leakage in 2021). In comparison, nitrogen requires no recovery treatment, and the overall life cycle cost is only 1/20 of SF6. Field samples illustrate that the SF6 circulation mechanism utilized in the high pressure gas insulated switchgear (GIS) of Toshiba in Japan has increased the recovery rate from 60% to 92%, but the cost of retrofitting equipment has reached $500,000 per unit, which has forced the supplier to increase the gas unit price by 8% to 12%. In the meantime, the US Environmental Protection Agency (EPA) requires SF6 users to report emissions every quarter, with administrative costs consuming 15% of the procurement budget, while China’s sulfur hexafluoride Emission Reduction Action Plan implemented in 2022 imposes a carbon quota fee of 8,000 yuan per ton on companies. Therefore, the additional cost of environmental protection in the sf6 gas price increased from 10% to 22%.
Supply chain monopoly and technical barriers intensify price imbalance. Three multinational companies (Chemours, Solvay, and Kanto Electrochemical) hold 90% of the world’s SF6 production capacity, and they control the supply of uranium hexafluoride raw materials by patents, and the raw material price will rise by 18% in 2023, which will be directly transferred to the terminal gas price. For example, Chemours’ patented SF6 technology includes a core process of 99.999% purity, increasing the likelihood of excessive impurity levels in competitors’ products by 30%, forcing downstream companies to pay a premium. Other technologies such as dry air insulated switchgear (rated voltage below 145kV) are 40% lower in cost than the SF6 solution but limited by the breakdown voltage (only 1/3 of the SF6) and equipment size (2.5 times larger), cannot fully substitute for it, resulting in inelastic demand in the power industry to support high prices. According to DNV forecasts, SF6 demand in the global grid market will reach 43,000 tons by 2025, and the average price is still $105 / kg, 130 times more expensive than industrial nitrogen ($0.8 / kg).
Geopolitical and logistical costs cannot be ignored. In 2022, because of the war between Russia and Ukraine, the shipment of uranium hexafluoride raw materials was suspended, the SF6 inventory cycle in the European market was extended from 30 days to 75 days, and the storage cost proportion in the purchase cost increased dramatically from 5% to 18%. In the meantime, the chartering of a seaborne specialty gas tank increased by 50 percent (from $200 to $300 a day for a 40-foot tank), and premium insurance increased by 7 percent due to the risk of leakage, which added 25 percent to SF6 CIF from Asia to North America. An example is the scenario of the 2023 Durban port strike in South Africa where 200 tons of SF6 was held up in port for 45 days, and the final purchaser paying an additional $120,000 in demurrage, which amounted to 9% of the purchase price. Additionally, the 35% import tariff imposed by the emerging economies such as India to protect local companies, such as SRF Gas, has pushed the country’s sf6 gas price to $143 / kg, 36% higher than the world average, further reflecting regional price distortions.
Policy revisions and technological advancements are altering cost structures. The European Union “Green Switchgear” program spent €120 million searching for SF6 alternative gases (e.g., 3M’s Novec 5110), but their dielectric strength is only 60% of SF6, and retrofitting the equipment takes 8-10 years to pay back. Whereas China’s Pinggao Electric vacuum arc extinguishing GIS equipment reduces the SF6 consumption by 70%, the one-time investment increases by 25%, which becomes a bottleneck for the replacement rate within the short term. Industry statistics, in the year 2023, the world SF6 recovery equipment market size has reached 470 million US dollars, and the recovered gas price is 40% lower than new gas, but the median recovery rate is only 55%, which is still far below the 99.99% high-pressure equipment purity requirement. Going forward, with SF6 being drawn into the ambit of carbon border taxes (e.g., EU CBAM), which is scheduled to reach 90 euros/ton of CO2 equivalent in 2030), sf6 gas price may increase by 12% to 18%, forcing companies to accelerate technology change or assimilate higher cost barriers.