Copper Surge Threatens Summer AC Affordability, Prices to Spike
Overview
Global copper prices have surged nearly 60% in a year, nearing $13,000 per tonne. This dramatic increase, driven by strong demand from EVs, renewables, and data centers amid supply tightness, is poised to significantly inflate costs for consumers. Air conditioners and other cooling appliances are expected to become 7-10% more expensive as manufacturers pass on higher input expenses, potentially offsetting recent tax relief measures.
Copper Price Surge Fuels Consumer Cost Worries
Copper prices have rocketed by approximately 60% over the past year, triggering significant cost increases across multiple industries. Domestic futures on the Multi-Commodity Exchange (MCX) traded at ₹1,281 per kg on January 9. Global benchmark prices are now hovering near $13,000 per tonne, according to Motilal Oswal Wealth Management, a level not seen in years.
Driving Forces Behind the Rally
The metal's ascent is attributed to a confluence of factors. Demand is surging from the electric vehicle (EV) sector, which uses three to four times more copper than traditional cars. The expansion of renewable energy infrastructure, including battery storage and solar installations, along with the rapid growth of data centers and AI infrastructure, further bolsters demand. Simultaneously, supply remains tight due to disruptions in major mining regions and geopolitical uncertainties.
Impact on Appliances and Industries
Consumers are bracing for higher prices on essential goods as manufacturers pass on escalating input costs. Air conditioners (ACs) and other cooling appliances are projected to become 7% to 10% more expensive this summer. This price hike threatens to negate the benefits of recent Goods and Services Tax (GST) reductions on ACs, which aimed to make them more affordable. Beyond cooling appliances, sectors reliant on copper, including EVs, power grids, construction, and real estate, face increased expenses. While alternatives like aluminium are being explored, copper's superior thermal conductivity and durability make it difficult to replace entirely.
Industry Outlook and Alternatives
Analysts from JP Morgan, Goldman Sachs, and Bernstein anticipate continued price volatility, though they don't expect prices to remain significantly above $13,000 per tonne for long. Forecasts place copper in the $11,750-$12,500 per tonne range, supported by ongoing electrification, infrastructure spending, and clean energy investments. Manufacturers are actively investigating hybrid solutions, combining copper with aluminium or advanced composites to manage costs while aiming to maintain efficiency and performance. This complex supply-demand dynamic suggests elevated copper prices are likely to persist, reshaping cost structures across a wide array of consumer and industrial products.
