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Leading European aluminium producer Hydro has not experienced a reversal of the copper-to-aluminium substitution trend despite US tariffs, and continues to see stronger demand from the US. This comes despite refined copper having avoided additional US tariffs while aluminium tariffs remained at 50%, the company told Fastmarkets.
“When it comes to copper substitution by aluminium in industrial applications, the region that is moving the fastest is the US, even after the US tariff. The heating, ventilation and air conditioning OEMs [original equipment manufacturers] in the US have a strong ‘fit for purpose’ orientation and are experts at cost management,” Chapis told Fastmarkets.
Chapis said that US customers remain willing to pay the additional cost from the 50% tariff on aluminium because aluminium is still cheaper than using copper.
“The OEMs in the US have recognized that they can save a lot of money [but] still produce a product that [meets] exactly [the] expected quality [standards] by their customers – longevity, performance – so they switched materials much faster than other regions,” Chapis said.
“For HVAC and refrigeration applications, when copper is three times more expensive than aluminium, the aluminium solution will be approximately two times cheaper at similar performance,” Chapis said.
The current copper-to-aluminium price ratio supports this substitution trend. The London Metal Exchange aluminium cash price closed at $2,618.48 per tonne at 5pm London time on August 29, while the LME copper cash price was at $9,821.74 per tonne at the same time on the same day, representing a ratio of approximately 3.7 times, even including aluminium ingot premiums.
Fastmarkets’ twice-weekly assessment for aluminium P1020A premium, in-whs dp Rotterdam, stood at $210-235 per tonne on August 29.
And Fastmarkets’ daily assessment of the aluminium P1020A premium, in-whs dup Rotterdam, was at $150-165 per tonne on the same day.
This ratio has consistently exceeded the traditional threshold for substitution. Mining giant BHP noted in a September 2024 report that “the copper-to-aluminium ratio has been in excess of 3.5 for much of the past five years, supporting our belief that the price ratio needs to be higher still, at around 3.5 to 4 times, before you [see] greater levels of substitution.”
Industry participants have noted increased interest in substitution, particularly following the rally in the LME copper cash price to above the psychologically significant $10,000-per-tonne threshold in July, Fastmarkets heard.
According to Fastmarkets principal analyst Andy Cole, when examining the global copper supply-demand balance over the next ten years, deep supply deficits and higher prices are inevitable.
“One of the natural reactions to this sort of outlook is greater substitution away from copper. It’s one of a number of ways the market will respond to plug the supply gap. So, demand losses for copper – with aluminium the main beneficiary – are part and parcel of our long-term forecasts for both these metals,” Cole said.
According to Hydro, the aluminium usage share in the global HVAC and refrigeration industry is estimated to be around 40% currently, double the level from five to six years ago after more companies have switched to aluminium from copper.
Daikin Industries, the world’s largest manufacturer of air conditioning and refrigeration systems, announced in September 2021 that it planned to halve copper use in its air-conditioning units by 2025. The strategy would substitute aluminium for copper, a market participant told Fastmarkets. But there has been no public confirmation yet whether this goal has been realized.
Aluminium adoption has established precedent in other industries. In the early 1990s, Volkswagen made the first decision to replace copper with aluminium tube for radiators in cars, and since then most radiators in automotive applications are made of aluminium rather than copper.
According to Hydro, approximately 10% of cables in electric vehicles (EVs)are now made of aluminium instead of copper.
High-voltage cables are gaining market share rapidly in EVs, according to Hydro, though bulk electricity grid applications continue to predominantly use copper.
A copper mining source told Fastmarkets that the red metal’s usage in EV components appears to have declined from “around 90” [kg per vehicle] in the past to roughly 40kg today, adding that “the number will probably keep decreasing.”
But the source noted this as a general trend due to better technology and efficiencies, saying: “For society, [it is] good to build things with less metal.”
According to industry analysts, copper consumption per EV is projected to fall by 30–40% between 2015 and 2030 — from about 99 kg in 2015 to 62 kg by 2030, reflecting efficiency gains in motor design and vehicle architecture.
But a second mining source downplayed the impact on copper demand.
“EVs, solar, wind… these are the smaller shares of copper demand,” the second source told Fastmarkets in the week to August 31.
“The bulk is still [from] electricity,” they added, pointing to grid connection in China as the bigger driver. “Nothing seems to be driving any change in copper use there.”
Despite the economic incentives, aluminium adoption faces technical hurdles that prevent simple material switches.
According to Chapis, aluminium adoption cannot be as simple as switching materials while making the product with the same design or system.
“In order to successfully adopt aluminium, you need to redesign the shape – for example, replacing [copper] tubes with micro channel extrusions – and re-engineer the system. But once you get through all that, customers don’t go back to using copper and stick with aluminium,” Chapis added.
Aluminium also has performance limitations compared to copper. According to cable manufacturer Nexans, aluminium conductors must be around 1.6 times thicker than copper to achieve the same conductivity, which can add weight and complicate installation.
Leonardo Energy, a knowledge platform supported by the European Copper Institute, notes that copper is more resistant to corrosion in extreme or saline environments, while aluminium often requires additional treatment or protection. These factors can increase maintenance requirements in certain applications.
According to Chapis, the substitution trend is underpinned by fundamental supply constraints in the copper market that extend beyond current pricing.
“For copper, there are no new mines that are planned to open, so the supply will remain tight and the quality over time is becoming a problem. Aluminium adoption over copper is a trend we are especially [seeing] in heat exchanger and air conditioning [applications],” Chapis said.
But Cole noted that while there is a lack of meaningful investment in greenfield projects, brownfield expansions and extensions of existing mines remain relatively accessible. “It’s the shortage of new mines that is the problem,” Cole said.
“Over the next five years, we forecast global primary aluminium supply to potentially reach the 100-million-tonne mark, with rapid growth coming out of Indonesia. Meanwhile, a copper mine shortage and lack of meaningful investment in brownfield projects has increased the risk of a deeper copper shortage, which could be implied that higher prices in copper can be expected,” Fastmarkets’ analyst Andy Farida said.
This outlook aligns with the latest data from the International Energy Agency, which projects that copper will require $350 billion in investment by 2040 to meet demand – yet even this would result in a 30% supply shortfall by 2035, according to the IEA’s Global Critical Minerals Outlook 2025, published on May 21.
Fastmarkets research projects a 909,000-tonne copper deficit in 2035, driven by compounding issues such as declining ore grades, project delays, and permitting constraints, according to its latest long-term outlook.
Treatment charges for copper concentrate – the fees miners pay smelters to process raw material into refined copper – have turned deeply negative this year while smelters compete fiercely for limited supplies, with some reducing operation or facing closure.
Fastmarkets calculated the weekly copper concentrates treatment charge (TC) index, cif Asia Pacific – a mid-point between smelter and trader buying levels – at $(62.10) per tonne on August 29, down by $0.20 per tonne from $(61.90) per tonne a week earlier.
But some industry participants dispute the severity of immediate supply constraints.
“If you look at the numbers, there’s no shortage of copper – it’s about getting it out of the ground,” the second copper mining source told Fastmarkets.
Despite this view, the first copper mining source acknowledged that “some players say ‘If we’re going to struggle to find [copper] units or [the] copper price [is] too high, we will start shifting to aluminium’.”
The second cooper mining source seemed unperturbed, saying: “For me, what underpins [demand for copper] is not going to change.”
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