"US Copper Tariff Seen as Positive for Poongsan"[Click e-Stock]

Difficult for the U.S. to Expand Domestic Production...
Increased Reliance on Imports
Poongsan Headquarters and Overseas Subsidiaries Expected to Boost Shipments
Defense Business Expansion Also a Positive...
"Even Better Prospects for the Future"

Poongsan is expected to benefit from the U.S. government's policy of imposing a 50% tariff on copper. The company is projected to see profit growth due to inventory valuation gains resulting from rising copper prices, as well as increased production at its domestic headquarters as shipments from its subsidiaries decrease.

On July 17, Korea Investment & Securities maintained its 'Buy' investment rating on Poongsan and set its target price at 228,500 won, citing these factors. The previous day's closing price was 164,000 won.

On July 9 (local time), after U.S. President Donald Trump announced a 50% tariff on copper, copper prices surged on the New York Commodity Exchange (COMEX). In contrast, prices on the London Metal Exchange (LME) fell. This is because U.S. copper demand, when traded on the LME with physical inventory located outside the U.S., is subject to tariffs. As a result, COMEX copper prices, which reflect inventory located entirely within the U.S., rose, while LME prices declined. Analysts believe that unless the copper tariff is removed, this price bifurcation is inevitable.

The issue is that the U.S. is a net importer of copper. As of last year, the U.S. had a net copper import volume of about 836,000 tons. Consumption was 1.87 million tons, but production was only 921,000 tons. The sum of production and net imports was 1.757 million tons, falling short of consumption, which led to a depletion of inventories.

Due to environmental concerns, it is not possible to increase production at smelting companies. Even efforts to boost recycling face cost challenges. These factors, in addition to tariffs, can contribute to higher copper prices within the U.S. If domestic copper prices rise, this could lead to increased imports of copper products, which in turn could boost copper demand outside the U.S. In this scenario, LME copper prices could also rise.

Ultimately, analysts see this as a positive for Poongsan. In the short term, the increase in COMEX copper prices is expected to result in significant inventory valuation gains for Poongsan's U.S. subsidiary, PMX, in the third quarter. The increase in copper prices in July alone is estimated to add about 5 billion won in gains based on the Korean won. While increased U.S. imports of copper products may reduce PMX's shipments, shipments from Poongsan and its Thai subsidiary, Siam Poongsan, are expected to rise.

Poongsan has also begun expanding its production capacity with an investment of about 30 billion won. On July 3, the company broke ground on its second plant, which is scheduled to begin production in 2028. This move is seen as a response to orders for fuzes from companies exporting ammunition to the Middle East. The construction of the second plant will also enable the company to independently procure fuzes for medium and large caliber shells.

Choi Moonseon, a researcher at Korea Investment & Securities, stated, "There is significant room for further increases in copper prices, and the defense business environment could be further elevated by expanding exports to the Middle East. Subsidiaries are also improving through rising copper prices and enhanced competitiveness, so we expect even better performance in the future."

On the 2nd, small and medium caliber ammunition from Poongsan was exhibited at the Korea International Defense Industry Exhibition held at Gyeryongdae, Chungnam. Photo by Kang Jinhyung aymsdream@

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