High copper prices force air conditioner manufacturers to switch to aluminum! ?
As copper prices soared to record highs earlier this year, air conditioner makers, a key buyer in this consumer market, are beginning to consider a switch to a cheaper alternative: aluminum.
According to many industry insiders, the air-conditioning industry, which accounts for a large proportion of global copper demand, has become increasingly intolerable to high copper prices. Japan's Daikin Industries Ltd., one of the world's largest air conditioner manufacturers, is planning to replace half of the copper in its equipment with aluminum by 2025. At the same time, some Chinese home appliance manufacturers are also studying to increase the use of aluminum as much as possible.
Song Jingxue, director of the research department of the China Household Appliances Industry Information Center, said that rising commodity prices, especially copper prices, are increasing cost pressure on air-conditioning manufacturers. Due to the low degree of product differentiation, it is difficult for many manufacturers to pass on the increased costs to consumers, so many companies are considering aluminum as a relatively cheaper alternative.
Air conditioners have long been one of the largest consumers of copper in the field of home appliances. In China, household appliances account for 15% of total copper demand, of which air conditioning consumption is one of the largest. According to data from the China Household Electrical Appliances Research Institute, copper accounts for about 20%-30% of air conditioner production costs.
Daikin Industries has experimented with using aluminum in some machines since 2013, said Takashi Abe, a spokesman for Daikin Industries. And given the surge in copper prices, the company plans to accelerate this shift. The company currently uses about 90,000 tons of copper each year and accounts for more than 10% of global air-conditioning production.
Tobari Takeshi, a spokesman for Fujitsu General, another Japanese manufacturer, also pointed out that the company is taking steps to use aluminum to produce key components such as heat exchangers, which originally use a lot of copper.
Replace copper with aluminum. Who will replace aluminum?
Copper is often the preferred choice by air conditioner manufacturers because it is more conductive of heat and electricity. Of course, aluminum is not without its advantages. It is significantly lighter and generally less expensive. The biggest barrier to aluminum adoption will be resistance from air conditioner consumers, who tend to prefer machines built with copper.
Song Jingxue pointed out that during the boom periods when copper prices rose sharply in 2005 and 2011, people had similar discussions about substitution. "People's traditional thinking always tends to think that copper is stronger than aluminum, because the expensive material is usually considered to be of better quality. Considering these market obstacles, the replacement plan may still take quite a long time to complete," Song Jingxue said.
Currently, copper prices are undoubtedly in the midst of another boom period of rising prices. LME copper futures soared to a record high of $10,747 in May this year. Although it has fallen back in the past few months, it is still at a high above the $9,300 mark. The industry generally expects little room for copper prices to fall, given the impending surge in demand from industries such as electric vehicles.
Morgan Stanley said in May that copper prices above $10,000 per ton would accelerate the implementation of alternative measures, with heating, cooling and cable applications facing the greatest risk.
However, what may make some air-conditioning manufacturers eager to switch from copper to aluminum feel miserable is that aluminum prices have also been rising crazily recently, even more rapidly than copper. Affected by Guinea-related supply concerns at the beginning of this week, LME aluminum prices have been rising all the way, and have further risen to US$2,848 during the day, a new high since 2008. China's energy conservation and emission reduction actions have also had a certain impact on the energy-intensive industry of aluminum smelting, making aluminum supply tight.
Perhaps, in the context of the general rise in commodities, air-conditioning manufacturers can use aluminum to replace copper now, but what can they use to replace aluminum in the future?
