[Click eStock] "Electric Power Equipment Sector Expected to Face Relatively Limited Impact from Tariff Imposition"

On the 4th, LS Securities analyzed that while the basic impact of the US tariff imposition on the power equipment sector is inevitable, the relative impact is expected to be limited compared to other industries.

Seong Jong-hwa, a researcher at LS Securities, explained, "The 25% reciprocal tariff imposed on Korea does have a basic impact on the power equipment sector as well," adding, "Among Korean power equipment companies, those without large ultra-high voltage transformer factories in the US or those with a high proportion of US sales from domestically produced products will be relatively more affected."

He continued, "Power equipment is currently experiencing a shortage (boom) of ultra-high voltage transmission transformers related to the US national project for power grid expansion and modernization, and the self-sufficiency rate of all transformers, including medium and low voltage distribution transformers, is only 20% for US-made products," he added. Furthermore, he predicted, "The impact on import demand due to tariff imposition will be relatively much less for companies with a high proportion of US exports of domestically produced products compared to other industries’ products that have substitutes due to price competitiveness variables."

Researcher Seong analyzed, "The impact of raw material price increases due to the US reciprocal tariff imposition can be reflected in the product selling prices for a certain proportion by most Korean power equipment companies," and added, "For products to be ordered in the future, the burden will be mutually shared through partial reflection of selling prices in consultation with customers."

He emphasized, "The US imports 80% of transformers, with 40% imported from Mexico," and "Since Korea’s reciprocal tariff rate is similar to Mexico’s (25%), there is no change in export price competitiveness with Mexico, which is a key transformer import country for the US."

Researcher Seong said, "The US tariff reinforcement is part of the reshoring strengthening policy," and added, "If the reshoring strengthening leads to increased moves by large Korean companies in semiconductors, batteries, automobiles, and home appliances to build factories in the US, opportunities will arise to supply distribution panels and distribution equipment."