Chinese air conditioner manufacturers will lift prices by as much as 15 percent to accommodate the rising cost of raw materials, but major retailers said they would not pass on price hikes to consumers in the short term at least.

 

Xu Dongsheng, deputy secretary-general with China Household Electrical Appliances Association, said yesterday that profits have fallen in recent years, but increases in the price of raw materials especially copper and aluminium will add more pressure to profit margins on home appliance products, especially air conditioners and refrigerators.

 

Air conditioners use as much as 6 kilograms of copper for one product.

 

But the price of copper at the Shanghai Futures Exchange reached 80,000 yuan (US$10,000) per ton on May 12, compared with 17,000 yuan (US$2.125) per ton at the end of last year.

 

"Appliance makers had to figure out ways to absorb the price hikes by themselves before, but the rise of the copper price is just too much for them this time," Xu said.

 

According to market monitoring firm GfK, the average price of air conditioners rose by 4.6 percent year-on-year to 2,823 yuan (US$353) in the first quarter.

 

Haier, the largest manufacturer of air conditioners, was reported to have raised its prices in Nanjing, capital of East China's Jiangsu Province, by as much as 15 percent, while Gree, the second largest, is expected to lift prices by 3 to 10 percent.

 

Changhong, a TV giant, but a smaller player in the air conditioner market, will also boost prices by 10 percent on average.

 

Liu Haizhong, a spokesperson for Changhong, said the price rise mainly affects new products with functions like power-saving, so older models will not be significantly affected.

 

However, major retailers said the guiding prices would not impact their sales and they had no intention of raising prices.

 

He Yangqing, a spokesman for the country's largest electronic appliance chain Gome, said his company had already signed a supply contract with air conditioner makers in March to buy products worth 5 billion yuan (US$625 million).

 

"We have plenty of supplies even till the end of July, so we do not see any need to raise the prices at least for two to three months," he said.

 

Dazhong, another major electronic appliance chain in Beijing, said statistics from its 37 stores showed the average price was 5 percent lower in the first two weeks than the end of April.

 

"The golden season for air conditioners is just coming, so I do not believe that any manufacturer will take the risk of losing customers with a price hike," said Lin Jianzhi, manager of air conditioner sales in Dazhong's Beijing branch.

 

An executive with a multinational air conditioner brand, who declined to be named, said the domestic air conditioner makers may have to absorb the rise in raw materials costs by themselves.

 

(China Daily May 24, 2006)