Copper Shortage: Aluminum Substitutes Accelerate Price Increases
Recently, the topic of Aluminum as a copper substitute has generated significant debate within the industry. The main factor is the global shortage of copper supplies, especially in the United States, due to its large reserves. Some organizations estimate that the shortage could reach one million tons. In response, copper prices have continued to rise, reaching record highs. Various industries, including the home appliance industry, are accelerating their search for aluminum substitutes. Meanwhile, aluminum prices have resisted this trend, reaching their highest level in three years. Industry experts anticipate a significant increase in aluminum prices.
Regarding the controversy surrounding aluminum as a copper substitute, the China Home Appliances Association stated on December 22 that this trend should be analyzed rationally, emphasizing that a balance between ensuring quality, respecting users, and contributing to the national strategy is crucial for industrial development. The association emphasized that replacing aluminum with copper is not a uniform transition, but rather part of exploring various technological pathways. There are three main challenges in this process. First, China's dependence on copper imports has reached 80%, and copper demand is booming in emerging industries such as new energy vehicles and 5G. The home appliance industry, a major copper consumer, needs to optimize resource allocation and reduce consumption. Second, copper prices are rising. Currently, the spot price of copper in Shanghai is approximately 95,000 yuan per ton, more than four times the price of aluminum (approximately 22,000 yuan per ton). The cost of copper raw materials for the same quantity is 12.7 times higher than that of aluminum, highlighting the pressure on companies. Third, technological advancements have compensated for aluminum's performance shortcomings. Chinese appliance manufacturers have significantly improved the performance of aluminum products through innovations in key technologies such as aluminum heat exchangers.
The main factor behind the rise in copper prices is the massive stockpiling of copper resources by the United States. Data shows that the US has accumulated a surplus of 720,000 tons of copper, taking advantage of the very high premium it enjoys on the New York COMEX market. CICC analysts predict that the US stockpile could reach between 1.6 and 1.8 million tons, but there is currently a deficit of approximately 1 million tons. This oversupply is expected to continue until tariffs take effect in 2026. As a result, copper prices remain high, with institutional investors forecasting a rise to $12,500 per tonne in the second quarter of 2026.
The surge in copper prices has triggered a simultaneous increase in aluminum prices. Currently, aluminum prices on the London Metal Exchange (LME) have reached a three-year high of $3,000 per tonne, more than 30% above their 2021 peak. Industry experts believe that the buck-trend rise in aluminum prices is due to a combination of financial and industrial factors. CITIC Securities notes that the global balance between supply and demand for electrolytic aluminum will be fragile in 2026, as China's production capacity approaches its maximum limit and European production capacity is threatened by power supply issues. Along with falling bauxite and alumina prices, profit margins for electrolytic aluminum companies are expected to increase. The Zijin Tianfeng Futures Exchange noted that aluminum prices are rising due to expectations of macroeconomic liquidity and technological innovation, and that there is potential for a significant rally.
Industry experts generally believe that the resource shortage caused by the lack of copper reserves in the US is not expected to change in the short term, and that the substitution of aluminum for copper will become the underlying trend. Supported by the substitution effect and a tight balance between supply and demand, aluminum prices still have ample room to grow.