As the Industrial Automation and Control practice has been performing research in support of the Power Protection Product market reports, our attention has been drawn to the underlying commodity of copper that is a key element to the manufacture of these products. In the last few days, there have been several articles in publications such as the Wall Street Journal and Financial Times that point to future increases in copper prices as demand is expected to exceed supply even if the economic recovery is slower than expected. On the financial front, this means a big impact/opportunity for countries like Chile and the buyers and sellers of future contracts.
Higher copper prices will have a likely impact on the Power Protection market as well. These products use a lot of copper as one would expect and therefore there will be upward pressure on selling price and a tightening of margins throughout the product value chain particularly for plug-in surge products where copper is a primary cost driver in what is considered a commodity product by itself. VDC estimates that increases in copper prices will impact surge suppression product lines in several ways:- Wall Plug Surge Suppressors will likely see an increase in demand as they use less copper than line cord products.
- Demand for shorter line cords on power strip type devices as consumers opt for less expensive items.
- There will be more incentives for re-cycling options for old / broken surge devices.
- Prices will likely rise and margins will decrease for all types of surge suppression products.
In the UPS market there will be similar impacts but, there may be other product architectural impacts as well. The amount of copper used in a power product of any type is related to the current being carried. For a given power level, if you increase the voltage, the current needed to carry the power decreases and with it the need for thicker copper. On a similar note, a single phase product requires 3 conductors; power (hot), return (neutral) or 2nd phase (hot), and ground. If you go to 3 phase, you can deliver the same amount of power with only one additional conductor and, in this case the conductors are smaller sized and less overall copper is needed. VDC estimates that there will be changes in UPS architecture/product mix as follows:
- Moves to 3 phase input/output versus single phase in most UPS products that are not plug-in desk/office type products.
- The internal DC battery bus voltage levels will increase.
- The move to provide DC output for use in Data centers will be delayed.
- The AC input / output will shift more from ~120V to ~ 220/230V and from 3 phase 208V to 480V.
A slightly more obscure result to the power protection market may also be seen when grid infrastructure improvements get delayed and thefts of copper from substations and other power related facilities become more prevalent. In these cases, there will be more power quality issues leading to more demand for protection products.
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