Daikin Industries plans to replace half of the copper units with aluminium

The escalation of copper price to a record level in 2021 is stirring buyers in a vitally segmented consumer market to consider economic substitutes, which reflects an early indication of an avenue that high prices forcefully can knock down demand.

The air-conditioner industry’s consumption is at risk, as it accounts for a substantial chunk of global copper demand.

Daikin Industries, the Japanese multinational air conditioning manufacturing company headquartered in Osaka, which is also the world’s top equipment producer, plans to replace half of the copper in its units with aluminium by 2025.

However, in China, a state researcher is working with the country's top home-appliances groups on utilising more aluminium.

Song Jingxue, Director at the China Household Electric Appliance Research Institute, said: "The surge in commodity prices, copper, in particular, is increasing cost pressures on air-conditioner manufacturers.”

"They can hardly pass that to consumers given low product differentiation, so many of them are considering aluminium as a cheaper option."

Copper is a vital constituent that has been used in air-conditioners, while in China, the machines hold 15% of copper demand that goes to home appliances.

The Chinese institute said: “Copper accounts for about 20% to 30% of the costs of making an aircon.”

Daikin's spokesperson said: “Since 2013, Daikin has used aluminium in some machines and plans to accelerate the shift given surging copper costs. It currently uses about 90,000 tonnes of copper a year, and makes more than 10% of the world's aircon.”

Takeshi Tobari, Fujitsu General’s spokesperson said: “The Company is taking steps to make key copper-intensive parts such as heat exchangers from aluminium.”

“Copper is usually preferred because of its high conductivity for heat and electricity, but aluminium has merits including lower weight and, typically, lower cost.”

Morgan Stanley stated in May 2021: “Copper prices above $10,000 a tonne will accelerate efforts at substitution, with heating, cooling and cabling applications at greatest risk.”

“There isn't much room for copper to fall given the coming demand boom in industries like electric vehicles”, said Daikin.

In association with leading aircon producers Gree Electric Appliances Inc. and Haier Smart Home, Song’s Research Appliance institute is building up a working group to promote the use of aluminium in heat exchangers.