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Copper does not react with cold water, hot water, or steam. However, iron reacts with steam. If the hot water tanks are made of steel (an alloy of iron), then iron would react vigorously with the steam formed from hot water. 3Fe + 4H2O → Fe3O4 + H2O
That is why copper is used to make hot water tanks, and not steel.
Answer: Copper does not react with cold water, hot water or steam, but iron in steel reacts with steam; copper is also a good conductor of heat.
A hot water tank is always in contact with hot water and steam. Iron (the main metal in steel) reacts with steam to form iron oxide and hydrogen, so a steel tank would slowly corrode:
\[\mathrm{3Fe(s) + 4H_2O(g) \rightarrow Fe_3O_4(s) + 4H_2(g)}\]
Copper is low in the reactivity series and does not react with water in any form, so a copper tank does not corrode this way. Copper is also a very good conductor of heat, so the water heats up quickly.
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