Copper Surge Fuels Earnings Growth for Korean Cable Giants
The price of copper has surged to a record high, reaching $14,238.5 per ton on the London Metal Exchange (LME), up 13.26% from the start of the year. This increase is expected to have a positive impact on the earnings of Korea's two major cable corporations: LS Cable & System and Taihan Cable & Solution.
Copper accounts for about 70% of cable manufacturing costs, but large cable corporations say copper price spikes have little impact on profit margins because sales contracts typically include an escalation clause that automatically reflects copper price fluctuations in selling prices. As a result, product selling prices climb as well, boosting top-line revenue.
Research estimates compiled by FnGuide suggest that Taihan Cable & Solution's consolidated expected revenue this year is 4.398 trillion won, with operating profit at 229 billion won, up 21% and 78%, respectively, from a year earlier. LS is expected to post revenue of 41.0841 trillion won, up 29% from a year earlier, and operating profit of 1.9996 trillion won, up 90%.
The surge in copper prices is attributed to rising demand for power grids and artificial intelligence (AI) data centers, which require massive amounts of electricity and cables. Electric vehicles also use about three to four times more copper than internal combustion engine cars. Meanwhile, supply is tight due to production halts at major copper mines in Chile and Peru and environmental regulations.