Firms substituting cheaper aluminium for copper, trend growing
LONDON - Some companies in Asia and Europe are starting to substitute cheaper aluminium wire for copper and the trend is due to gain momentum as copper prices are expected to see further gains, consultancy CRU said on Tuesday.
"Over the past year we have been seeing rapidly growing interest, people are putting two and two together," CRU analyst Aisling Hubert told an event during London Metal Exchange Week.
"We have had a lot of conversations with our clients."
Many firms regarded a rally by copper in May to a record high in May of over $11 100 per metric ton as a sign of higher prices in the future as the energy transition boosts demand, she added.
Both copper and aluminium are good conductors of electricity, but there is a big gap in their price.
Currently, the price of copper CMCU3 is 3.8 times that of CMAL3 aluminium and CRU forecasts that the ratio will rise above 4 next year, a key level seen as driving more substitution, said Hubert, who specialises in wire and cable markets.
"We see substitution taking place, but it's not everywhere and certainly there's massive regional diversity."
The state Chinese power grid, a huge user of metal, is expected to stick with copper because officials are risk averse and worried about potential problems in switching metals, she said.
"In the high voltage submarine cables connecting the power grids between countries, we expect those to stay copper, but almost everything else is up for grabs," Hubert added.
For example, substitution was currently taking place by manufacturers who use electrical wire for motors in appliances such as refrigerators in Asian countries such as Japan and Korea, she said.
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