Copper prices have surpassed $10,000 per ton, improving the revenue of Poongsan, which processes and exports copper. With the increase in exports of K9 self-propelled howitzers and K2 tanks to Poland, orders for shells are also continuing. Poongsan secured new defense contracts worth 729.9 billion won last year.
According to the business and defense industry on the 4th, Poongsan, established in 1986, is primarily divided into two business sectors: non-ferrous metals and defense. Non-ferrous metals involve processing copper or copper alloys into plates or rods and supplying them to the semiconductor, automotive, and construction industries.
The non-ferrous metals business is sensitive to copper prices since it uses copper as a raw material. When copper prices rise, the roll margin, which indicates the difference between the selling price of non-ferrous metals products and the price of raw materials, increases, leading to greater profits.
On the 3rd, copper prices traded at the London Metal Exchange reached $10,120 per ton. This is the highest since May 21 last year, when prices were $10,775. After hitting a high in May last year, copper prices fell to the mid-$8,000 range, but rose again when U.S. President Donald Trump considered imposing tariffs on copper.
The global construction boom of artificial intelligence (AI) data centers has also had an impact. Typically, a medium-sized data center uses 5,000 to 15,000 tons of copper. Some analyses suggest that ultra-large data centers specialized in AI computation may require up to 50,000 tons of copper.
A relation in the securities industry noted, "The average price of copper in the second quarter rose more than 3% compared to the first quarter, leading to improved performance in the non-ferrous metals business."
Poongsan manufactures ammunition ranging from the smallest 5.56mm cartridges to 155mm artillery shells used in firearms, armored vehicles, tanks, self-propelled howitzers, naval vessels, and aircraft. Both the 155mm shells used in the K9 self-propelled howitzer produced by Hanwha Aerospace and the 120mm guided shells used in the K2 tank produced by Hyundai Rotem are made by Poongsan.
Hanwha Aerospace plans to export 360 units of the K9 self-propelled howitzer after signing primary and secondary weapon contracts with Poland. Approximately 120 shells are required per howitzer, leading to a total of over 43,000 shells. The price of shells has risen significantly due to increased demand stemming from the Russia-Ukraine war.
In the first export contract for the K2 tank signed with Poland in July 2022, Poongsan agreed to supply 50,000 guided shells. On the 2nd, as Hyundai Rotem announced a second contract for the K2 tank, Poongsan's prospects for additional orders have increased. Poongsan also secured a contract worth 370.3 billion won for the supply of large-caliber shells with the Defense Acquisition Program Administration on the 24th.
Recently, a shortage of shells has emerged due to increased conflicts worldwide. Reports indicate that the monthly consumption of shells by both sides in the Russia-Ukraine war reaches about 360,000 rounds. Poongsan can produce approximately 200,000 to 250,000 155mm shells annually and plans to expand production capacity by increasing factory size.