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Copper Crisis: Aluminum Takes Over!
8 Jul
Summary
- High copper prices are forcing manufacturers to switch to aluminum.
- Ferrari, BMW, Tesla, and Daikin are adopting aluminum wiring.
- The copper-to-aluminum price ratio is at a record high of 4.3.
Copper is being priced out of certain markets, compelling manufacturers to adopt aluminum as an alternative. The significant price difference between the two metals, a ratio now at a record high, is driving this trend. This substitution is already visible in the latest car models from Ferrari and BMW, which feature more aluminum wiring, a move pioneered by Chinese electric vehicle makers and Tesla. Major appliance manufacturers, such as Japan's Daikin, are also increasing aluminum usage to cut costs.
The copper-to-aluminum price ratio, historically around 3.7, has surged to 4.3. This widening gap, with copper at $6.11 per pound and aluminum at $1.41 per pound, is closely monitored by investment banks. While aluminum offers weight savings, it requires thicker wiring due to lower electrical conductivity compared to copper.
Investment banks view the elevated ratio as an indicator of potential future price movements. UBS noted that while this ratio tends to revert to its mean, the process can be lengthy, involving supply chain adjustments and customer preferences. Despite the difficulty in predicting specific triggers, historically, such high ratios do not persist indefinitely.
