Daikin Industries, Japan’s top air conditioner maker, will halve the amount of copper used in air conditioners from the current 90,000 tons per year by fiscal year 2024, Nikkei has learned.
The international price of copper has risen by 40% to 50% in the past year amid expectations for an economic recovery from the COVID-19 pandemic. Decarbonization trends have meanwhile spurred the change to electric vehicles, which require copper for their components. In response to the increased pressure on profits, Daikin plans to use more materials like aluminum, ahead of other companies.
The soaring prices of copper may stimulate competition for technological development in the search for alternative materials.
Copper is widely used in electronic parts, car parts and wiring because it conducts heat and electricity efficiently and is easy to process. The London Metal Exchange three-month futures, a key benchmark, hit a record high of $10,700 per ton in May for the first time in about 10 years, which was more than double the price set in the spring of 2020. It is currently trading around $9,000 per ton.
Daikin has used copper for heat exchangers in outdoor air conditioning units. In fiscal 2021, higher prices are expected to increase costs by 30 billion yen ($273 million) year on year, accounting for about 10% of the company’s total forecasted operating profit.
The use of copper will be reviewed on the premise that prices will remain high. “Even if the market is settled, it will be about $8,000,” said an executive.
Daikin will halve the amount of copper used in Japan by fiscal 2023 and reduce usage overseas as well. Copper in heat exchangers will be replaced with aluminum, which is one-third to one-fifth the price of copper.
Daikin has focused on the functional advantages of aluminum, such as weight reduction and reduction of refrigerant. The company has been engaged in research and development of processing technology for about 20 years. In 2012, it started to use aluminum in commercial air conditioners. It will accelerate the shift to aluminum for household air conditioners to gain the cost benefits.
Japan’s domestic demand for copper is estimated to be around 900,000 tons per year at present, and many other manufacturers are facing the same problem.
“A rise in the price of copper has a great influence on profit and loss. We will make efforts to reduce the amount of copper used,” said Hiroshi Niwayama, vice president of Fujitsu General.