Rising copper prices are expected to lift sales for cable makers, but gains in inventory valuation and operating profit remain limited, and smaller firms face additional hurdles in passing on costs.

Copper products. [AP]
Copper products. [AP]

Copper prices — the metal is often called the "rice of industry" for its ubiquity in manufacturing — have surged to all-time highs, prompting expectations that cable makers, which rely on copper as a core raw material, will enjoy higher sales and inventory valuation gains. However, analysts say the benefits will vary widely by company depending on how quickly firms can pass rising raw-material costs on to customers, as well as on exchange rates and supply conditions.

Record copper prices seen lifting sales

On Wednesday (local time), the three-month copper futures price on the London Metal Exchange hit an all-time high of $14,800 per ton, driven in part by supply concerns. Copper has been climbing sharply on a combination of rising demand from AI data centers and power-grid investment, production disruptions at major mines, and heightened geopolitical tensions in the Middle East that have pushed industrial metal prices broadly higher.

For cable makers, rising copper prices are fundamentally a sales driver. Many contracts for wire and cable products include escalation clauses that link product prices to movements in the cost of copper, the primary raw material. When copper prices rise, manufacturing costs increase as well — but companies can pass at least a portion of that increase on to buyers.

LS Cable & System, for example, saw its consolidated sales grow from 6.77 trillion won ($5.06 billion) in 2024 to 7.59 trillion won last year, boosted by rising copper prices and growing demand for power cables and wiring from AI data centers. The company posted 4.52 trillion won in sales in the first half of this year. The expansion in revenue can work in the company's favor when it comes to valuation.

Taihan Cable & Solution posted consolidated sales of 2.28 trillion won in the first half of this year, up 29 percent from a year earlier. In a recent report, Hana Securities said the company's materials and other segment — which handles the production of communication cables, power cables and winding wires — has significant exposure to exchange-rate and copper-price fluctuations. "In the first half of this year, sustained increases in both copper prices and the exchange rate raised the segment's contribution to overall company earnings," the report said.

Operating profit gains limited; gap widens between large and small firms

Higher copper prices do not automatically translate into higher operating profit, however. Because copper prices are so volatile, companies cannot stockpile large quantities of raw materials in advance, which limits the upside from inventory valuation gains. An industry official said that while escalation clauses allow companies to reflect higher copper prices in their selling prices when costs rise between the time of contract and the time of order, "that doesn't mean operating profit actually improves."

A significant gap is also expected between large cable makers with heavy overseas exposure and those focused on the domestic market. Companies with a broad global customer base tend to have escalation clauses more firmly embedded in their contracts, making it easier to pass raw-material cost increases through to product prices.

Domestic-focused and small and medium-sized cable makers, by contrast, may struggle to immediately reflect higher costs in their contract prices, given the financial constraints facing major domestic clients such as state-run enterprises. If supply disruptions persist, securing the copper volumes they need on time could also prove difficult. Sharp swings in the won's value could further dilute the benefits of higher copper prices. "There are too many variables — exchange-rate movements and others — for the cable industry as a whole to view rising copper prices as simply good news," one industry official said.


keg@heraldcorp.com