The Rise in Copper Prices: What does it mean for our industry?
We can all agree it’s been an absolute rollercoaster of a year. 2021 has kept the challenge of 2020 alive with a new copper shortage, and record-setting prices that could have a lasting effect on HVAC and multiple adjacent industries. Currently sitting at around $4.75 per pound, commodity analysts predict the price of copper to continue to trend upwards. Some estimate we could see prices reach $6.00 per pound before the end of the year. This brings up some glaring concerns; how do we adjust to these price hikes tied to supply constraints? What can our industry do to keep end users satisfied, and how will this affect our bottom line? Let’s look at the solutions and explore some of the options available.
A Top-Down Approach
Starting with HVAC manufacturers, the price of copper will most likely hold the largest impact on commercial product lines. This quarter is a good time to remind wholesalers about the shortage and cost hike. These efforts will hopefully trickle down to homeowners to see the bigger picture behind the products available to them. Ramping up production of aluminum-based heat exchangers for air handlers and conditioners could make the difference in seeing desired quarterly figures while keeping prices low for wholesalers. The job of convincing contractors and homeowners to make the switch falls on the wholesalers and contractors.
The obvious selling points wholesalers have for contractors starts with a look at the commodity and the cost efficiency of alternatives. Unlike with copper, aluminum tubing and fins do not have the risk of oxidation. This in turn means less corrosion as the equipment ages. The HVAC industry is fortunate to have an expendable relationship with copper, unlike other facets of the building industry. Because of this, aluminum alternatives are readily available and more cost-efficient to the manufacturers. It’s the job of the wholesalers to relay this shift down to the contractors. We have an opportunity to set the course of the HVAC market away from the copper demand, hopefully leading to its return to “normalcy” in future quarters, and allowing the supply of this precious metal to stabilize.
Push and Protect
Contractors have a unique opportunity in the HVAC industry with how they market their services and products to the homeowners/end users. I see two distinct paths that are worth pursuit; push the goods and services available to us while providing context to the shortage, and/or give the end users an opportunity to protect their current systems. HVAC equipment will adapt and innovate around the constraints of the market. We’ve already seen this with the success of AC units built without copper tubing and evaporator fins within the last 30 years. The current copper crisis is already leading manufacturers towards thinner and weaker copper tubing due to product constraints. Technicians have reported that they make repairs just as difficult as the aluminum alternative, making the purpose of copper irrelevant. Contractors should be transparent and honest about these realities with their customers. It’s an opportunity to build trust, and to add context to the reason why they don’t have certain products or must charge extra.
It’s sometimes an impossible task to convince the commercial market to make this switch due to performance constraints. Copper remains the best choice in conduction and heat transfer for large commercial units. These units also require an extreme amount of demand that the residential market is not used to seeing. Take the time to inform your staff and technicians about how to communicate these points to commercial end users.
The second path has more to do with the present-day situation. We still have millions of units installed that have that precious metal sitting in them, ripe for the picking. The opportunity for theft has skyrocketed with scrap copper pricing being at a record high. This is the perfect talking point for getting skeptical customers interested in HVAC-based security systems. Products like the Warning Watchdog from iO HVAC Controls deal with this problem head-on with an alarm system connected straight to the unit. Any tampering or deconstruction efforts signal a loud alarm which notifies the owners. Upselling products like this to homeowners or commercial markets now has the perfect excuse. We’ve never seen copper prices this high, why risk losing those metals to theft?
Now is also the best time to stock up on readily available thermostat wire. With the price hike already hitting some wholesalers, copper plated wiring isn’t safe from the shortage. We carry a wide range of gauges and lengths for any jobsite requirement at Jackson Systems. Take control of your supply situation to minimize the stress on the end user’s wallet. Wire is unfortunately one of those products that currently doesn’t have many alternatives that omit copper.
The discussion about the copper shortage isn’t necessarily complex, but it requires everyone in the industry to be on the same page. It starts with manufacturers and works its way down to the end user. Though we all hope to see the price of copper stabilize, if it doesn’t, we need to be ready with the next wave of technology to address the problem. The best business owners are always informed and ready to shift the sails with the wind of the market, and this is no exception. I have no doubt our industry can adapt and find new ways to innovate, communicate, and adjust to the challenge ahead.
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