Gov't warns hoarders not to do it

Vice Finance Minister Lee Eog-weon holds a government task force meeting on Ukraine. [YONHAP]

The government vowed to crack down on illegal hoarding of raw materials or parts whose prices are rising due to the war between Russia and Ukraine.

“It has become difficult to predict the full impact on the global and domestic economy, as the situation in Ukraine and around sanctions continues to remain uncertain,” said Vice Finance Minister Lee Eog-weon during a government task force meeting Friday.

“The government will try to minimize the effect on financial transactions and exports resulting from the instability in Ukraine and the sanctions on Russia,” he added.

Lee said the government will closely monitor supply networks and crack down on hoarding.

The conflict has led to spikes in commodity prices. Recently nickel prices have more than doubled from an average $18,000 per ton last year to $34,000.

Russia is the fifth largest supplier of nickel to Korea, accounting for 6.1 percent of its imports.

Nickel is a key material in batteries for electric vehicles.

The price of black coal rose 80 percent to $249 per ton compared to last year’s average of $137. Russia accounts for nearly 41 percent of Korea's imports of the product.

In the case of grain, the government will be looking into alternate markets to make up supplies previously imported from Ukraine.

Imports of pollack, snow crab and cod from Russia account for 90 percent or more of Korea's total imports of the products.

Restaurants have been forced to stop offering such fish products.

During the meeting, Lee raised concerns about global supply disruptions, already affected by the Covid-19 pandemic.

“While currently no noticeable situations have been detected in supplies, the price volatility of some of the [parts and key materials] has risen,” Lee said. “We need to prepare for the situation [in Russia and Ukraine] to be extensively prolonged.”

On Thursday, the government announced that it would run a 2-trillion won ($1.6 billion) loan program mostly through state-owned financial institutions to support Korean companies facing liquidity crunches because of the conflict in Ukraine.

The government will be adding 50 billion won to the Ministry of SMEs and Startups' emergency management program, which has a total budget of 200 billion won.

Loans of up to 300 million won will be offered to companies doing business with Russia with average annual interest rates of 2.25 percent.

Korea’s exports to Russia, which grew nearly 49 percent last month year-on-year, fell 6.6 percent in the first nine days of this month.

Exports to Ukraine fell nearly 99 percent in the first nine days of this month. In February they grew 21.2 percent year-on-year.

The International Monetary Fund raised the possibility of lowering its global economic growth outlook due to Russia’s invasion.

The IMF projected earlier this year the world economy would grow 5.9 percent this year.

“Surging prices for energy and other commodities — wheat, corn, metals, inputs for fertilizers, semiconductors — they are coming in many countries on top of already high inflation and are causing great concern in so many places around the world,” said Kristalina Georgieva, IMF managing director, Thursday during a media roundtable.

“When we look at the real economy, clearly we see contraction in trade, but also, a dent in consumer confidence and purchasing power,” she continued

Despite rising concerns, HSBC on Friday released an optimistic view of Korea.

“Korea’s economy continues to impress with its resilience,” wrote Frederic Neumann, HSBC’s global research Asia co-head.

Neumann praised the Korean central bank’s “delicate” handling of its monetary policy, which limited financial volatility.

Neumann was cautiously optimistic about inflation.

“Rising energy prices pose a headwind for Korea’s economy, as well as for its trade partners. But
broader inflation pressures in Korea should gradually ease over the course of the
year,” he said.

BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]