Manufacturing in second half is seen as mixed

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Manufacturing in second half is seen as mixed

Market analysts are casting doubt on the possibility of a manufacturing recovery in the second half.

Aside from carmakers and shipbuilders, the prospects are poor. Steel makers and chip makers, especially, are in for a sluggish year.

The dim outlook was conveyed at a seminar held by the Federation of Korean Industries on Monday in Yeouido, western Seoul.

Chips and steel companies are seen faring the worst.

Analyst Pak Yu-ak of Kiwoom Securities said memory chip prices will continue to decline due to accumulated stock. Demand for DRAM memory chips used in data servers and for NAND were expected to slightly recover but not enough to reverse the general price and export trends.

Another factor is Beijing’s ongoing anti-monopoly investigations targeting Samsung Electronics, SK Hynix and Boise, Idaho-based Micron.

In the steel market, the price increases of iron will drag down profitability. The collapse of a dam operated by Brazil’s Vale and typhoons in Australia have driven up prices.

In some case, factors are mixed, with positives and negatives at work.

The major risk for electronics companies was the U.S. government’s sanctions on Huawei, which could delay the global build out of the 5G network and negatively affect the global IT market, said Kiwoom Analyst Kim Ji-san.

But in the short run, difficulties in Huawei’s phone business may benefit local phone makers, like Samsung and LG Electronics, he added.

For petrochemical companies, unstable global demand due to the U.S.-China trade war and an anticipated shale gas supply increase in the United States are expected to keep refining margins low.

A positive factor is IMO2020, set to go into effect on Jan. 1. 2020. The new regulation, established by the International Maritime Organization, calls for the use of eco-friendly fuels, which could increase demand for low-sulfur products.

The reform is also good news for Korea’s ship makers, which have secured the largest orders for eco-friendly LNG ships. Its implementation is likely to boost the demand for these ships.

Car sales in the United States are expected to grow this year for Korean car makers, with new releases soon hitting the market. Sales in China are expected to remain sluggish due to Beijing’s policy of limiting the number of license plates issued.

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