(Yicai) May 29 -- Chinese makers of air conditioners are not expected to raise their prices this summer due to high inventory and low demand despite surging costs caused by soaring prices of copper, a key raw material.

Prices of finished products are unchanged from a year ago, as well as month-over-month, a retailer of air-con units in Guangzhou said to Yicai. If manufacturers hike their prices, sales will fall, the person added.

Prices of the most-traded futures contracts for copper on the Shanghai Futures Exchange jumped to a record high of CNY88,600 (USD12,223) per ton early last week, around a 30 percent increase from the beginning of this year.

However, brands are pushed to absorb the added cost. Inventory has reached as high as about 50 million units, a peak in nearly two years, Long Fei, an analyst at ChinaIOL.com, told Yicai.

An earlier misstep caused the excess output. Manufacturers added production this spring, encouraged by robust demand last summer amid unexpectedly high temperatures, per Long. But sales turned out to be poor during the May Day holiday, which led to the currently high inventory.

Moreover, southern regions saw more rains than usual recently, which dampened the demand for cooling equipment.

Flat Domestic Prices Until Second Half

Given the sharp increase in copper prices, the production cost per air conditioner has climbed about 3 percent, a source at Skyworth Air Conditioning, a major manufacturer, told Yicai. The company has hiked its export prices but kept its domestic prices unchanged to reduce inventory, which should lead to a lower gross profit margin.

The impact of rising copper prices may become more noticeable in the second half because the products in stores right now were produced in the first quarter, using copper bought earlier, said Wu Qinan, chairman of Skyworth. Whether the company will raise its prices in the second half partly depends on market competition, Wu added.

Cost pressures could become conspicuous in the second half, Long said. Producers need to reduce their inventories so price wars are possible. In this case, small and medium-sized enterprises face greater risks than bigger brands of home appliances that are more capable of mitigating risks, the analyst added.

Industry leaders, including Gree Electric Appliances, Midea Group, and Haier Smart Home, said respectively since late March that they would trade futures contracts to hedge against price fluctuations of raw materials, including copper.

Editors: Tang Shihua, Emmi Laine