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Companies Swap Copper for Aluminium Amid Price Surge

Created at 30 Jun · 6:16 AM1 source↑ Market-relevant
IN SHORT

Companies are increasingly substituting copper with aluminum due to copper's record high prices. Aluminum, though less conductive, is cheaper and lighter, making it attractive for automotive and electrical grid applications.

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Key Numbers

4.3record copper-to-aluminium price ratio in January
4.2current copper-to-aluminium price ratio
61%aluminium's conductivity compared to copper
1.6times larger aluminium conductors need to be
3.3times heavier copper is than aluminium
15% to 20%wiring weight saving by Ferrari
2011year BMW first used aluminium conductors
2019year Tesla started using aluminium wiring in Model Y
€10 trillionexpected global investment in electrical grids by 2030
40%aluminium by weight used by Prysmian
3 percentage pointsincrease in Prysmian's aluminium usage over five years
210,000 kmdistribution network of Energy Queensland
50 lbsweight reduction in Lennox International models

Who's Involved

Ferrari
Italian sports car maker using aluminium wiring
BMW
German automaker progressively expanding aluminium conductor use
Tesla
Automaker pioneering aluminium use in EVs and wiring
AVATR
Chinese EV maker using aluminium electrical wiring
XPeng
Chinese EV maker using aluminium electrical wiring
Xiaomi
Chinese EV maker using aluminium electrical wiring
Toyota
Global car maker evaluating aluminium substitution
Volkswagen
Automaker using aluminium in specific applications
Nexans
World's second biggest cable manufacturer
Prysmian
World's biggest electrical cable maker
Energex
Queensland's state-owned electricity distributor
Emma Oliveri
Spokesperson for Energy Queensland
Daikin Industries
World's largest air conditioning manufacturer
Lennox International
U.S. company developing aluminium coil technology
Carrier Global
U.S. company using aluminium coil technology
Companies Swap Copper for Aluminium Amid Price Surge

↳ Why This Matters

The shift from copper to aluminum highlights the impact of commodity price volatility on industrial supply chains and product design. It demonstrates how economic pressures can drive innovation and material substitution, affecting manufacturing costs, product performance, and the demand for key metals.

Key facts

  • Companies are increasingly substituting copper with aluminum due to copper's record high prices.
  • Aluminum is about a quarter of the price of copper but has lower conductivity.
  • The copper-to-aluminum price ratio is a key factor in the decision to switch.
  • Automakers like Ferrari, BMW, and Tesla are using aluminum wiring to save weight and cost.
  • Electrical cable manufacturers and HVAC companies are also adopting aluminum.
  • Aluminum's lighter weight is particularly beneficial for electric vehicles and power lines.

The significant increase in copper prices has prompted various industries to consider and implement the substitution of copper with aluminum, a cheaper and lighter alternative. This shift is driven by the economic advantage and weight reduction benefits aluminum offers, particularly in sectors like automotive and electrical infrastructure.

Aluminum is approximately one-quarter the price of copper, though its electrical conductivity is only about 61% of copper's. This necessitates larger aluminum conductors, but the overall cost savings and weight reduction often outweigh this drawback. Industry sources indicate that companies typically consider the switch when the copper-to-aluminum price ratio reaches between 3.5 to 4.0 or higher, a level that has been met recently.

In the automotive sector, particularly for electric vehicles (EVs), reducing weight is crucial for extending driving range. Ferrari has reported saving 15-20% of total wiring weight by using aluminum wiring, while BMW has progressively increased its use of aluminum conductors since 2011. Tesla has been a pioneer, using aluminum for wiring in models like the Y and Cybertruck, and Chinese EV makers such as AVATR, XPeng, and Xiaomi are also adopting this practice. Toyota is evaluating the material for specific applications, and Volkswagen uses it where benefits are clear.

The electrical wire and cable industry is also seeing this trend. With an estimated €10 trillion in global investment expected for electrical grids by 2030, aluminum is poised to capture a larger share due to its cost advantage, according to Nexans. Prysmian, the world's largest cable maker, currently uses about 40% aluminum by weight. Energy Queensland has been replacing copper with aluminum for years in its distribution network, citing cost-effectiveness, durability, and lighter weight for power lines.

In the heating and air conditioning sector, Daikin Industries is maximizing cost reductions by switching to aluminum. Lennox International and Carrier Global have developed and implemented aluminum coil technology to reduce weight and improve corrosion resistance, especially in coastal environments.

Frequently asked questions

Companies are switching primarily because copper prices have reached record highs, making aluminum a more cost-effective alternative. Aluminum is also significantly lighter, which is advantageous for applications like electric vehicles and power lines.

Aluminum is cheaper and lighter than copper, but it is less conductive. This means that aluminum conductors need to be larger than copper ones to carry the same amount of electricity.

The automotive industry, particularly for electric vehicles, is a major adopter. The electrical wire and cable sector, as well as the heating and air conditioning industry, are also increasingly using aluminum.

The copper-to-aluminum price ratio hit a record of 4.3 in January and is currently around 4.2, a level that typically triggers companies to consider substitution.

What Happens Next

01Companies will continue to evaluate the copper-to-aluminium price ratio for further substitution decisions.
02Further investment in electrical grids globally may increase demand for aluminum in this sector.
03Ongoing research and development may improve aluminum's conductivity or lead to new applications.

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Cadence
CME Headlines
  • Amendments to the Daily Settlement Procedure Document for the Aluminum Futures Contract
    20 Jul · 1:54 PM
  • Fresh from the Trading Room: Copper’s Crossroads
    1 Jul · 7:45 AM
  • Fresh from the Trading Room: Copper’s Crossroads
    1 Jul · 7:45 AM

How It Developed

Copper prices reached a record high earlier this year.
Aluminum is approximately one-quarter the price of copper.
Aluminum has 61% of copper's conductivity, requiring larger conductors.
Companies consider switching when the copper-to-aluminum price ratio is between 3.5 to 4.0.
The ratio hit a record 4.3 in January and is currently around 4.2.
Aluminum is about 3.3 times lighter than copper.
Ferrari began using aluminum wiring in its 296 model last year, saving 15-20% of wiring weight.
BMW has progressively expanded the use of aluminum conductors since 2011.

Sources

T1
Factbox-Why companies are swapping copper for aluminiumReuters

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