Copper prices are nearing record highs due to the prolonged conflict in the Middle East and increasing global demand, creating a favorable outlook for the domestic power equipment industry. The demand for transformers and circuit breakers has surged, driven by the need to upgrade North American power grids and the expansion of artificial intelligence data centers (AIDC), placing the sector in a supercycle. Additionally, manufacturers are able to pass on rising costs to consumers, further accelerating this supercycle.
As of May 14, copper prices on the London Metal Exchange have surpassed $14,400 per ton, continuing their upward trend. This marks a nearly 40% increase from last May's price of $10,360 per ton and a 10% rise from approximately $13,150 per ton at the beginning of this year.
Copper constitutes about 20% of the weight of transformers, making the industry particularly sensitive to fluctuations in copper prices. Typically, rising raw material costs pose challenges for manufacturers. However, the current power equipment market is characterized by supplier dominance, allowing companies to effectively pass on these cost increases to their prices.
Notably, there is a growing demand for high-value products such as high-voltage transformers and low-loss transformers for AI data centers, with the rise in copper prices supporting this trend.
Hyosung Heavy Industries has seen an increase in high-voltage transformer orders, particularly in North America and Europe. The proportion of low-cost orders has decreased, and high-value projects are beginning to positively impact profitability. In the first quarter, the company secured approximately 4 trillion won in new orders, becoming the first domestic power equipment firm to exceed a backlog of 15 trillion won.
HD Hyundai Electric has also benefited from the booming North American high-voltage transformer market, with its operating profit margin rising above 20% in the first quarter. The company has already achieved 42.6% of its annual order target of $4.222 billion and has secured orders extending to 2029.
LS Electric is demonstrating strength in the medium and low-voltage distribution equipment sector for AI data centers. The company recorded its highest-ever performance in the first quarter and is planning to expand its distribution equipment at the Bestrop site in Texas, while also considering expansions at its Southeast Asian factories in Vietnam.
Industry insiders are optimistic that the growth of the AI sector will lead to stable growth for the power equipment industry. The four major domestic power equipment companies have already secured workloads for at least three years. Furthermore, demand for high-voltage power equipment is expected to continue rising not only in North America but also domestically, driven by semiconductor clusters, AI data centers, and new industrial complexes.
One industry official stated, "Given that the market is currently supplier-driven, when raw material prices rise, companies can pass those costs onto consumers. Thus, even with rising raw material prices, supplying companies may see increased revenues."
* This article has been translated by AI.
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