Financial Association News, April 21st (Reporter: Ren Chaoyu) - Within the household appliance industry, copper constitutes a significant portion of the cost for air conditioning units. With copper prices continually rising, coupled with the approaching peak season, concerns arise over whether air conditioning prices will follow suit.
According to some air conditioning dealers interviewed by Financial Association News, given the current consumer environment, there's generally pessimism regarding future price increases for air conditioners. It can be confirmed that major brands' "supply prices have not changed." Copper pipe manufacturers state that overall industry orders are good, with customers showing strong willingness to purchase but exhibiting hesitance due to high prices. Some relevant publicly listed companies have indicated that there are currently no adjustments to terminal selling prices.
"In the short term, copper prices remain in a state where they are easy to rise but difficult to fall, still possessing potential for further upward exploration."
Stable Air Conditioning Prices; Copper Pipe Companies Report Good Orders
Copper, often dubbed the "copper doctor," earns this moniker mainly due to its closely intertwined price trends with the macroeconomy, as well as its forward-looking nature. However, the effects of rising copper prices vary among participants in the manufacturing supply chain.
Analyst Xiao Chuankang from the Copper Division of Shanghai Steel Union told Caixin reporters that the fluctuation of copper tubes is closely related to electrolytic copper. When copper prices surge, the prices of copper tubes at the production end also rise, with price increases mirroring those of electrolytic copper.
A copper tube company interviewed mentioned that they didn't expect the peak season to last so long last year, but the overall industry orders were good. Orders for April and May are satisfactory, but there's uncertainty for June. Currently, long-term contracts and spot purchases are evenly split, and downstream customers have a strong willingness to purchase, although there is some caution due to high prices.
A procurement officer from a copper-consuming company mentioned that there aren't many strategies to cope with rising copper prices. "If production urgently requires it, we have to place orders; otherwise, we wait for prices to drop. Some negotiate with suppliers to schedule production before pricing, but future pricing remains uncertain."
For air conditioner manufacturers, copper price hikes have a greater impact compared to other household appliances. Research indicates that copper costs account for 22% of air conditioner costs, 9% of refrigerator costs, 10% of washing machine costs, and 14% of range hood costs.
Caixin reporters learned from distributors that major air conditioner brands haven't adjusted supply prices due to the rise in copper prices. Recent inquiries with listed companies such as Midea Group and Haier Smart Home yielded similar responses.
Staff from Midea Group stated that the increase in copper prices from over 8,000 to over 9,000 USD, priced in dollars, is a normal fluctuation and doesn't constitute a "significant increase." There are currently no plans to adjust retail prices further. They emphasized that overall, the company's gross profit margin in 23 years is at its best level, and any rise in raw material prices will be offset through measures like internal efficiency improvements.
Staff from Haier Smart Home mentioned that while copper prices have an impact, the company has hedging policies in place. Adjustments will be made reasonably according to market changes, but there are currently no large-scale price adjustments.
Another staff member from an air conditioner company stated that commodity price increases won't immediately lead to adjustments in air conditioner retail prices. The interviewed copper tube company also mentioned, "We haven't seen air conditioner manufacturers raising prices in the short term."
Copper prices are unanimously bullish, but air conditioner price increases face a complex situation
The current stability in air conditioner prices doesn't necessarily predict future trends. According to public information, multiple institutions unanimously predict copper price increases.
The interviewed copper tube company predicts that if high copper prices persist for two months or longer, air conditioner prices may rise.
Xiao Chuankang stated, "Most terminal air conditioner manufacturers and copper tube companies sign annual long-term contracts, and some large air conditioner manufacturers also use futures tools for hedging. Moreover, it's not yet the peak season for air conditioner sales, so it's unlikely that the increase in copper prices will lead to price hikes by terminal air conditioner manufacturers. Of course, if copper prices continue to surge, price hikes cannot be ruled out."
Although there were rumors in the industry recently about uniform air conditioner price increase notices of unknown origin and design style, interviewed air conditioner distributors seem to adopt a more indifferent attitude.
A Mr. Wang, an air conditioner distributor from Hebei, remarked, "This issue isn't important. What goes up must come down, and vice versa." He believes that previously, distributors could profit by stocking up during the off-season and selling at higher prices during the peak season. But now, they can only maintain a stable profit of a few hundred. If prices rise during the current peak season, end consumers are unlikely to accept it. At most, brands can only "increase prices overtly and reduce them covertly."
A senior industry insider revealed to Caixin reporters that due to the generally average prosperity of the air conditioner industry, a price war has actually erupted in the 2024 cooling season. Notably, major brands have barely participated, with the focus mainly on small and medium-sized brands. Major brands have only adjusted their shipping strategies for mid- to low-end models.
Mr. Liu, an air conditioner distributor from Hunan, believes that recently, companies have pushed a large amount of stock to distributors and secondary market bosses, showing a significant increase in shipments. However, these goods have not reached consumers' hands. As companies increase production scale, middlemen can only reduce prices to sell, which will further burden the companies.
Industry online research shows that in March 2024, domestic air conditioner production reached 21.808 million units, a year-on-year increase of 23.4%; sales reached 22.429 million units, a year-on-year increase of 21.6%.
"March still falls within the peak season for air conditioner stocking, with high enthusiasm for domestic and overseas stocking. It is expected that industry-wide inventories will continue to rise before the peak season arrives at the terminal, while facing the pressure of rising costs. Faced with various uncertainties in the current market, industry manufacturers need to maintain objective and rational judgments, be cautious in their expectations, and rationally schedule production," stated Industry Online.
