Air-Conditioner Industry Shifts to Aluminium as Copper Prices Skyrocket
In a significant development for the manufacturing sector, Vir S Advani, Deputy Chairman of the Western Region of the Confederation of Indian Industry (CII), announced on Friday that companies producing air-conditioning and refrigeration products are planning to reduce their reliance on copper and increase the use of aluminium. This strategic move comes in response to the escalating prices of copper, which have surged due to heightened demand from data centres globally.
Price Hikes Driven by Regulatory and Market Pressures
Advani, who also serves as Chairman and Managing Director of Blue Star, explained that air-conditioner manufacturers have recently increased prices primarily due to mandatory improvements in energy efficiency standards. Additionally, a sharp rise in copper prices—approximately 18%—has further contributed to the cost burden. Although the Indian government reduced the Goods and Services Tax (GST) on air-conditioners from 28% to 18%, this relief was short-lived as prices climbed again from January 1.
"The combination of the energy efficiency table charge, which is revised biennially, and the spike in copper prices has effectively negated the GST benefit," Advani stated. He emphasized that government regulations require companies to enhance the energy efficiency of their devices every two years, necessitating costly modifications.
Copper Price Surge and the Shift to Aluminium
The dramatic increase in copper costs has been a key factor in this industry shift. Advani noted that copper prices have jumped from $800 to $1,400 per metric ton, significantly impacting the final production costs of air-conditioners. "As a result, companies are increasingly turning to aluminium as a more cost-effective alternative," he added. This transition is expected to help manufacturers manage expenses while maintaining product quality and compliance with energy standards.
This move underscores broader trends in the manufacturing and technology sectors, where resource allocation is being reshaped by market dynamics and regulatory frameworks. The shift to aluminium could also influence supply chains and pricing strategies in the coming years, as companies adapt to evolving economic conditions.
