Starting at the end of March 2024, a wind of rising raw material prices began to blow. The first is the price of copper, which began to rise strongly on April 8, up 8.99% from the beginning of the year, hitting a new high in the past two years. The second is the price of aluminum, on April 3, the main contract price of Shanghai aluminum hit a new high this year. At the same time, the price of refrigerants is also rising sharply, according to the industry's online monitoring, the average market price of refrigerants R22, R32, R125 and R134a in the first quarter of this year increased by 11.2%, 49.4%, 42.1% and 21.9% year-on-year respectively.
Driven by the sudden price increase of upstream raw materials, the cost pressure of downstream household air conditioners has been highlighted, and some household air conditioning companies have also issued price increase letters. So, what is the impact of the price increase of raw materials on the downstream machine, and how will the subsequent market develop?
ChinaIOL
Copper prices have a significant impact on the cost of air conditioning, and the trend synchronization rhythm lags slightly behind
From the perspective of the cost composition of household air conditioning products, raw materials such as steel, copper, aluminum, and plastics account for almost 80% of the manufacturing cost of products. Among them, copper accounts for about more than 20%, aluminum accounts for about 4%, and refrigerants account for about 1%. Copper accounts for the largest proportion, so the impact of copper prices on the cost of air conditioning is more direct and significant than that of other materials.
According to the industry online comparison of copper prices and air conditioning price trends over the years, the two have a strong correlation, and the price of air conditioning is slightly lagging but the trend is basically synchronized.
2020-2024 comparison of the average domestic and foreign sales price of household air conditioners and the year-on-year trend of copper prices
Judging from the data from the first three months of 2020-2024, 2020-2021 is a period of substantial growth in copper prices, and cost pressures have driven the average price of air conditioners to rise rapidly. From 2022 to 2023, the price of copper will continue to fluctuate around 65,000-70,000 yuan/ton, while the price of downstream household air conditioners will be basically stable during this period. Since the beginning of 2024, copper prices have fluctuated around 68,000-70,000 yuan, and only began to accelerate significantly at the end of March.
Judging from the average trading price of copper in Shanghai futures in the first quarter of 2024, it maintained a slight increase of about 1.2% year-on-year. Therefore, from the short-term market point of view, the cost pressure of air conditioning enterprises is gradually increasing, but due to the advance of raw material procurement, the particularity of air conditioning products and channels and other factors, the rise in raw material prices may not necessarily be transmitted to the downstream in real time.
The impact of rising copper prices on downstream air conditioning prices is essentially a long-term dynamic development of the relationship between game and balance.
ChinaIOL
The price increase has boosted the production of air conditioners, and the brand has shown a trend of differentiation
Before this wave of copper price increases, the average domestic and foreign sales of household air conditioners have been in a downward trend. From the perspective of the brand structure, there is also an obvious trend of differentiation, the price of the head brand is relatively stable, but the price competition of small and medium-sized brands continues to increase from the opening of the cold year of 2024 to the first quarter of this year.
With the rise of copper prices in the first quarter, many household air conditioning companies have also issued price increase notices, but according to industry online observation, most of these price increase notices do not clearly state the magnitude of the price increase, but only indicate that the product price will be raised at a certain point in time. To a certain extent, this is also a marketing method in disguised form to promote channel delivery and payment, and promote suppliers to get goods.
It is worth noting that the rise in copper prices at the end of March also "added a fire" to the already hot air conditioning schedule. According to the industry's online production scheduling data, after the first quarter of household air conditioning production increased by 31.5%, the second quarter continued to maintain a high growth, is expected to increase by 19.1% from April to June, greatly exceeding industry expectations.
2022-2024 June Household Air Conditioner Production Schedule Monthly Shift (10,000 units)
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Price increase VS price war, how to develop the market of household air conditioners
The production of household air conditioners has increased significantly, which has brought a high inventory base to the industry. According to industry online statistics, the total inventory of household air conditioners in February 2024 will reach 49.308 million units, a year-on-year increase of 18.0%. After the arrival of the peak season, it is still unknown whether the company's shipments will be smooth, and there is a risk that sales will not meet expectations, so manufacturers are generally worried about whether there will be a price war in this year's peak season. The recent rise in raw material prices has made the subsequent market strategies of manufacturers more confusing.
According to industry online research, the short-term rise in costs caused by copper prices has a relatively small impact on the head air-conditioning companies, on the one hand, because the head enterprises have the advantage of large-scale production and will reserve raw materials in advance, and at the same time, enterprises also have corresponding investments in bulk commodities, which can offset part of the cost pressure caused by price increases. Correspondingly, the rise in copper prices has brought greater pressure to small and medium-sized brands, first of all, the rise in raw materials will squeeze corporate profits, and at the same time, these enterprises have limited rights to speak upstream and downstream, and once the price rises, there is a possibility of losing competitive advantage.
Therefore, Industry Online believes that it is unlikely that there will be a price war in the household air conditioning market in the future, which mainly depends on the strategic actions of the head brand.
The following is the author's short-term prediction and several suggestions for the follow-up market, and I hope to discuss with you:
- The background and reasons for the price increase of various raw materials are not exactly the same, and the price increase of copper is mainly due to the tight supply of global copper concentrate, coupled with the expected increase in inflation, which may cause the overall high price of copper to move upward. It is expected that the cost pressure of air conditioning will increase in the future.
- Due to the characteristics of the household air conditioning market and the current background of high production scheduling and high inventory, it is more recommended that enterprises achieve price increases by adjusting and optimizing the product structure, rather than following the trend of price increases. Small and medium-sized enterprises, in particular, are the first to survive in the cold year of 2024.
- The rise in raw material prices is both a challenge and an opportunity, on the one hand, it "tortures" the cost control and product premium ability of enterprises, and on the other hand, it also forces enterprises to improve the channel structure, increase the proportion of high-end products, expand multi-scenario applications (fresh air, purification, etc.), and enhance the bargaining space of products in the whole industry. All in all, in the face of the dual pressure of high costs and high inventory, it is hoped that all enterprises will reach a consensus on the price strategy as soon as possible to ensure the healthy and rational development of the industry.
Note: The data in this article comes from the "Monthly Research Report on Competitiveness Data Analysis of China's Household Air Conditioning Industry", in which the trend of copper prices is compiled according to public data
The industry online household air conditioning module reporting system includes air conditioners, compressors, dehumidifiers, purifiers and other products, covering the upstream and downstream industrial chains, and the data indicators include global, domestic and foreign sales, production, sales and inventory and other dimensions, with detailed data and rich types.
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