Exports fall at fastest clip since 2009 global crisis
The last time exports saw such a drop was in August 2009 when they fell 20.9 percent.
The Ministry of Trade, Industry and Energy on Tuesday said low crude oil prices reduced the prices of Korea’s petrochemical exports, and slowed exports to China also hurt. Exports of Korean petroleum products tumbled 40 percent year-on-year in August. Exports to China dropped by 8.8 percent from a year earlier, and analysts say the speed of the decline is accelerating.
“The 14.7 percent year-on-year loss is a large plunge that we haven’t faced in a while,” said Yoon Gap-seok, head of the Trade Ministry’s international trade policy division. “But there was nothing much we could do, considering low oil prices and the export slowdown to China.”
Global oil prices generally rose for the first six months of this year to post $60.80 per barrel in June, but they again started declining in July to hit $47.80 per barrel.
Intermediary products saw double-digit declines as global raw material demand dropped.
Exports of vessels saw the largest drop - 51.5 percent year-on-year - as deliveries of Korean oil drilling ships were delayed due to falling oil prices. Overseas shipments of petroleum and petrochemical products declined by 40.3 percent and 25.7 percent year-on-year, respectively, and the recent explosions in Tianjin, China, delayed trade in these products worth $100 million.
Semiconductors and mobile phones were the only two products to see shipments expand in August, thanks to the popularity of system processing chips in China and newly released smartphone models like Samsung’s Galaxy Note 5 and Galaxy S6 Edge Plus.
Relatively new export items like organic light-emitting diodes and cosmetics saw good increases, but they still account for less than 10 percent of Korea’s exports.
Exports shrank with Korea’s biggest trade partners, including Japan, the EU, the United States, Eastern Europe, South America and even the Middle East, due to a slowdown in global trade.
Korea was hit hardest by the slowdown of exports to China, which buys 25 percent of Korea’s total exports. Exports to China fell by 8.8 percent.
The Trade Ministry says exports should be somewhat better in the latter half of the year.
Trade analysts, however, said they doubted that.
“Because Korea’s currency is highly likely to depreciate following the U.S. interest rate hike, the impact of the yuan’s devaluation will be limited,” said Lee Bong-geol, a senior researcher at the Institute for International Trade at the Korea International Trade Association, by phone.
Lee said Korean companies have to catch up with quickly changing demand in China.
“Korea cannot give up intermediary product exports, which still account for 70 percent of total exports,” Lee said. “But local manufacturers should target Chinese manufacturers whose main customers are in the domestic market, which nowadays have much more advanced technologies and show high interest in Korean parts and materials, by negotiating with them in terms of price.”
Lee emphasized that Korean exporters should not view China as merely a place that makes things anymore, as the Chinese government is promoting domestic industries instead of export-oriented ones.
Meanwhile, August imports saw an 18.3 percent decline, which was the 11th straight month of negative growth. This resulted in a trade surplus of $4.3 billion, the 43rd consecutive monthly rise.
BY KIM JI-YOON [firstname.lastname@example.org]