Could China Use Aluminum Instead Of Copper Wiring?
A few weeks ago, China's National Energy Administration made an announcement that may have caught the interest of copper investors. The regulator released nationwide industrial standards for the use of low-voltage aluminum alloy cables, meaning that China's state power grid could use aluminum alloys instead of copper for some types of wiring.
A few weeks ago, China's National Energy Administration (NEA) made an announcement that may have caught the interest of copper investors. According to Metal Bulletin (subscription), the NEA has released nationwide industrial standards for the use of low-voltage aluminum alloy cables. The change, effective in September, means that China could use aluminum alloys instead of copper for some types of electrical wiring. A research note from Goldman Sachs (NYSE:GS) has been making the rounds, suggesting that a switch could mean big problems for copper demand. As the Financial Times points out, China has ample aluminum supply, but needs to import most of its copper. Furthermore, copper is over three times more expensive than aluminum, making for an attractive price difference. "An increased rate of substitution to aluminium alloy, from copper, is highly likely ... the China price of copper is 3.4 times that of aluminium (and substitution becomes profitable at a ratio of 2.5/1)," the news outlet quotes the note as saying. Aluminum issues The low-voltage cables referred to by the NEA are mainly used to connect buildings to substations. Previously, such cables were made with copper as users were unsure about the quality of aluminum alloys. And certainly, while aluminum wiring is sometimes used in planes due to the metal's high conductivity to weight ratio, the use of aluminum in electrical wiring has had its issues. For example, aluminum wiring has been linked to house fires. Aluminum was used extensively in electrical wiring for homes in Canada and the US in the 1960s and 70s, and while there are solutions to the safety problem, houses with aluminum wiring will still often garner more expensive home insurance.