As copper prices soared to record highs earlier this year, one of the key buyers of the consumer market -- Foshan -- An air-conditioner maker -- is considering switching to a cheaper alternative: Aluminium. Air Conditioners, which account for a large proportion of global copper demand, have become increasingly intolerant of high copper prices, according to many in the industry. Daikin Industries Ltd. , one of the world's largest air-conditioning producers, is planning to replace half of its equipment with aluminum by 2025. At the same time, some Chinese manufacturers are also studying how to make aluminum more widely available. Song Jingxue, head of research at the China household appliance industry information centre, said the rise in commodity prices, particularly copper, was adding to cost pressures for air-conditioning manufacturers. With a low degree of product differentiation, it is difficult for many manufacturers to pass on the increased costs to consumers, so many are considering aluminium as a cheaper alternative. For a long time, air conditioning has been one of the big copper-consuming households in the field of home appliances. Household appliances account for 15 per cent of copper demand in China, with air-conditioning being one of the biggest. Copper accounts for 20% to 30% of the production cost of air conditioners, according to the China Academy of Household Electrical appliances. Takashi Abe, a spokesman for Great Jin's industry, said that since 2013, Great Jin had experimented with using aluminum on some machines. With copper prices soaring, the company plans to accelerate the shift. The company currently uses about 90,000 tonnes of copper a year and produces more than 10 per cent of the world's air conditioners. Takeshi Bari Shi, a spokesman for Fujitsu General, another Japanese manufacturer, said the company is taking steps to make key components such as heat exchangers from aluminum, which is heavily made of copper. Aluminum for copper. WHO's GONNA replace aluminum? Copper is often preferred by air-conditioning manufacturers because it conducts heat and electricity better. Of course, aluminum is not without its advantages. It is noticeably lighter and usually cheaper. The biggest obstacle to aluminium adoption will be resistance from air-conditioning consumers, who tend to prefer machines made of copper. Song points out that there was talk of a similar alternative during the copper boom of 2005 and 2011. "The conventional wisdom has always been that copper is better than aluminum, because expensive materials are generally considered to be of better quality. Given these market obstacles, the alternative plan may still take quite a long time to complete,"Song said. There is no doubt that copper prices are in the midst of another boom in rising prices. LME copper, which surged to an all-time high of $10,747 in May, remains above the $9,300 mark, although it has fallen in the past few months. Given the impending surge in demand in sectors such as electric cars, copper is widely expected to have little room to fall. Morgan Stanley said in May that copper prices above $10,000 a tonne would accelerate the implementation of alternative measures, with heating, cooling and cable applications the most at risk. But, to the dismay of some air-conditioning makers eager to switch from copper to aluminium, aluminium prices have also been rising furiously, even more rapidly than copper. Aluminium prices on the LME have risen further this week to $2,848, the highest level since 2008, on supply concerns in Guinea. China's efforts to save energy and reduce emissions have also had an impact on the energy-intensive industry, tightening supplies. Perhaps, in the context of the commodity boom, air-conditioning manufacturers can now replace copper with aluminum, but what can replace aluminum in the future? 

Source: The Financial Times

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