High copper prices drive AC manufacturers to use aluminium in aircons

Copper’s surge to record levels this year is spurring buyers in a key consumer market to mull cheaper alternatives, in an early sign of how high prices might destroy demand.

Consumption is at risk in air conditioners, an industry that accounts for a sizeable portion of global copper demand. In China, a state researcher is working with the country’s top home-appliances groups on using more aluminum.

The world’s top maker of the equipment, Japan’s Daikin Industries Ltd., plans to replace half of the copper in its units with aluminum by 2025. And

“The surge in commodity prices, copper in particular, is increasing cost pressures on air-conditioner manufacturers,” Song Jingxue, director at the China Household Electric Appliance Research Institute said by phone. “They can hardly pass that to consumers given low product differentiation, so many of them are considering aluminum as a cheaper option.”

Air conditioners have long been a key destination for copper. In China, the machines make up a big part of the 15% of copper demand that goes to home appliances.

Copper soared to all-time highs in May — and remains elevated — amid speculation that a wave of demand from new-energy sectors will leave buyers short and push prices much higher in coming years.

While aluminum has also surged, the moves to cut reliance on copper reflect how they are preparing for long-term risks. Copper accounts for about 20% to 30% of the costs of making an aircon, according to the Chinese institute.

Daikin has used aluminum in some machines since 2013 and plans to accelerate the shift given surging copper costs. It currently uses about 90,000 tons of copper a year, and makes more than 10% of the world’s aircons.

Fujitsu General Ltd., another Japanese producer, is also taking steps to make key copper-intensive parts such as heat exchangers from aluminum, spokesman Takeshi Tobari said. Copper is usually preferred because of its high conductivity for heat and electricity, but aluminum has merits including lower weight and, typically, lower cost. Copper prices above $10,000 a tonne will accelerate efforts at substitution, with heating, cooling and cabling applications at greatest risk, Morgan Stanley had said in May this year.

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