Strong won pushes export prices to lowest level in 36 years

Cargo delivery trucks arrive at a cargo terminal of Incheon International Airport in Incheon earlier this month. [YONHAP]

Export prices fell to the lowest level in 36 years in November due to the strength of the Korean won against the U.S. dollar, central bank data showed Wednesday.

According to the Bank of Korea, the export price index fell 0.8 percent in November on month, to 91.96. This is the lowest level since 91.09 recorded in December, 1984. The index has been sliding for four straight months since August.

Compared to last year, export prices fell by 4.9 percent, extending the year-on-year index decline to 18 months.

The export price index is based on the value of export deals in Korean won, meaning changing exchange rates can heavily influence the index.

“The recent rise in the value of the Korean won against the greenback was a major driver [of the decline in export prices],” a central bank official said.

The average value of the Korean won against the U.S. dollar appreciated by 2.4 percent from 1,144.68 won in October to 1,116.76 won last month, according to the Bank of Korea.

Export prices based on contractual currency, which does not take into account changes in the exchange rate, actually increased by 1.4 percent in November compared to the previous month.

By sector, the export price of coal and petroleum products rose as international oil prices increased, but prices of semiconductors including dynamic random-access memory (DRAM) chips fell. The coronavirus pandemic has pulled down global demand for chips, also pulling down chip prices, the bank official said.

While the strong won has translated to reduced export profitability for Korean companies, the bank said the impact of exchange rate changes on exports has decreased in recent years as Korean companies have solidified their presence in overseas markets with high quality products and are able to mitigate exchange rate effects by importing intermediate goods or locating their production plants overseas.

Import prices fell by 0.3 percent on month to 95.78 last month.

Based on contractual currency, import prices rose by 1.9 percent on month in November to 95.61.

BY KIM JEE-HEE [kim.jeehee@joongang.co.kr]