Chinese Air-Con Prices Are Set to Rise on Higher Metal Costs
Wang Zhen
DATE:  Feb 25 2021
/ SOURCE:  Yicai
Chinese Air-Con Prices Are Set to Rise on Higher Metal Costs Chinese Air-Con Prices Are Set to Rise on Higher Metal Costs

(Yicai Global) Feb. 25 -- Higher in air conditioner prices seem to be on the cards as China’s home appliance makers, especially those that produce air-con units, grapple with the increased cost of copper, aluminum and other industrial commodities.

Surging prices are “causing great suffering for us manufacturers,” said Li Mingyang, general manager of Letu Electric Appliance, which specializes in making fans.

Since before the Lunar New Year holiday, copper prices are up 38 percent, according to a list Li showed Yicai Global. His list also shows that the cost of alloy has jumped 48 percent, aluminum 37 percent, stainless steel 45 percent, glass 30 percent, plastic 35 percent, cartons for packaging 20 percent, and foamed plastic 15 percent.

Profit was thin even before commodity prices jumped because of the pressure brought to bear on the Zhongshan-based firm’s export business by the yuan’s appreciation. Li forecasts that the cost of making home appliances will jump 3.5 percent this month from January, but the firm cannot do anything regarding the orders it has already received.

Many overseas raw material producers cannot restart output because of the Covid-19 pandemic, so prices are on the up, said Xiao Youyuan, who was formerly with air-conditioner giant Gree Electric Appliances.

Higher raw material prices will drive up costs for air-con firms by 10 percent to 15 percent from the same period last year, as they use vast amounts of copper and aluminum in their products, according to Gan Jianguo, operations general manager at Phillips Air Care China.

Peak Season Pricing

About 15 percent to 20 percent of an air conditioner’s price is down to its copper and aluminum content, Xiao said, adding that the jump in copper has forced manufacturers to hike export prices by about 10 percent.

But the cost of an air conditioner in China has not changed, Xiao said. “No one dares raise prices because they are afraid doing so may affect sales during peak season.” He sees prices rising next month when peak season begins as plants struggle to absorb the rising costs.

Gan expects profits at air-conditioner makers to fall sharply this year given soaring costs and thinks they will exercise prudence in their production arrangements in light of the sharp rise in costs. So, air conditioners are likely to be in short supply over the summer peak season.

Retail prices of home air-cons in China’s domestic market will rise 20 percent to 30 percent this year, Gan predicted.

Big home appliance companies are in a better position than their smaller rivals, Xiao said. Large firms can absorb a certain amount of higher costs because they have more say in raw material procurement and product prices, while others in the field will find it harder to survive.

Editors: Tang Shihua, Peter Thomas

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Keywords:   Price Jump,Industry Commodity,Copper,Aluminum,Production Cost,Air Conditioner,Home Appliance,Industry Analysis