Study of Copper Substitute in High Copper Price Market Environment

The high price of copper drives up industry cost, also it is difficult for terminal products to raise price to transfer the cost pressure brought by increase in copper price, as a result downstream consumption markets instead try to seek ways to reduce copper usage in related products (such as reducing the thickness of copper tube), or directly use substitute products, so as to lower cost.

For copper, which is a rare metal, relevant study has been going on for a long time to find its substitute, and its substitute products have already entered the market. According to study results, during the process of technological development, price is not the dominant factor leading to substitution by new materials. However, on the consumption market of common products, price is always a sensitive factor, according to survey made by ANTAIKE, under general circumstances, when copper price tops 50,000 yuan/tonne, the consumption market begins to look for copper substitutes, when copper price tops 70,000 yuan/tonne, the demand for copper substitutes will pick up obviously, when copper price drops to 65,000 yuan/tonne, the competitiveness of copper substitute again starts to decline, the demand for copper will again recover.

Among the various metals which can replace copper, aluminum boasts the greatest advantage in cost performance so as to become the major material to replace copper. The price ratio between copper and aluminum began to widen since 2003, by 2010 it reached 3.674.

Another substitute material which poses competitive pressure on copper’s spreading application is titanium, the specific weight of titanium is 4.51, only half of that of copper, but it features high stiffness, and strong corrosion resistance. It therefore enjoys evident advantage in maritime engineering, and petrol chemical sectors, making it the major substitute of copper in the condensing tube market. Since 2002, the price ratio between titanium and copper has showed a narrowing trend, in 2010 it even reached the historical low record of 1.033,which means titanium’s advantage in downstream consumption is continually increasing.

As an important production raw material, copper features high performance in electrical conductivity and heat transmission, strong corrosion resistance, and excellent machinery processing property, which enables it to be widely used in all sectors of the national economy.According to overall analysis, in all major consumption sectors, the total substitution volume of copper in the domestic market in 2010 is 660,000 tonnes.

Based on copper’s different usage properties,the substitution materials in the consumption market include the following categories:

1. Electrical conductivity field: Wire and cable sector, and electronic sector, which mainly use aluminum, aluminum based compound material, optical fiber material as substitute. It is estimated that in 2010 the substitution volume of copper in the wire and cable sector is between 195,000 and 225,000 tonnes

2. Heat transmission field: Heat exchange system, which uses aluminum, steel and titanium material as substitute. It is estimated in 2010 the substitution volume in the heat exchanger sector is 260,000 tonnes.

3. Corrosion resistance property field:Power generation, sea water desalination, petrol chemical and ship building, which use titanium, steel and aluminum materials as substitute.

4. Machinery processing field: Easily cut parts and light industry products made of copper alloy, which uses zinc alloy, steel, aluminum alloy materials as substitute.

It is estimated that in 2010 the substitution volume in machinery, electronics, and building material sectors is about 195,000 tonnes.

At present, the economic growth of countries in Europe and America is declining, market consumption is sluggish; on the other hand, Chinese economy will continue to keep steady growth from the mid to long term perspective;industrialization and urbanization processes will continue, China’s Western Development,and power grid construction will stimulate investment growth in infrastructure, the demand for copper will continue to grow.

ANTAIKE estimates that between 2011 ～2015, the average annual growth rate of refined copper consumption in China will possibly reach 6.0%. In 2015 the consumption volume will reach 9,100,000 tonnes, up by 2,300,000 tonnes compared with that in 2010. Therefore,the shortage of refined copper plus huge market demand will keep copper price to stay at high level for a long period. Based on such assumption, copper’s substitution consumption will become a hot spot.

Judging from China’s future economic development trend and the demand for copper consumption, assuming that the existing metal price ratio might widen further, ANTAIKE estimates that there will be 1,080,000 tonnes of copper substitution volume from all consumption sectors in the domestic market in 2015.During the “Twelfth Five Year Plan” period,the state government will strengthen the construction of modern power grid system, improve regional main grid, promote smart grid construction and so on; as a result the demand for wire and cable will further increase, it is expected that by 2015 the copper usage volume in power and cable sectors will reach 5,680,000 tonnes, whereas in the low voltage delivery and distribution sectors, copper’s substitute materials will have vast space of growth, especially in electric equipment, and telecommunication sectors, it is expected the entire wire and cable sector will need about 300,000 tonnes of copper substitution volume. In the heat exchanger sector, air conditioners and refrigeration products will become the major field needing copper substitute. With the increase in the market recognition toward aluminum alloy, and copper-clad aluminum materials, the application of its substitution materials in air conditioners and refrigeration products will experience evident growth. It is estimated that by 2015 the copper substitution volume in heat exchanger sector will reach around 450,000 tonnes; the substitution volume in machinery manufacture sector(zinc alloy, aluminum alloy, steel materials)will be around 160,000 tonnes; the substitution volume in electronic sector (superconductor material and aluminum based, copper based compound materials) will be around 20,000 tonnes, the substitution volume in building material sector (zinc alloy, aluminum alloy, steel,and ceramic materials) will be around 150,000 tonnes. Furthermore, with the R&D and spreading in application of new materials, copper’s market share in common products will further decline.