Companies forgotten due to Covid are ready for a comeback
Many companies are rejoicing as Covid-19 transitions into an endemic disease, but those who experienced an unexpected boom during the pandemic are worried about what's to come.
Oil refiners expect an increase in the amount of gas being pumped into cars as spring comes and more people go outside due to the lifted outdoor mask mandate and business operating hour restriction. A new 30 percent fuel tax cut was implemented May 1, higher than the 20 percent cut before, and is expected to help with profitability.
Some companies are looking forward to the rising demand in international travel and increase in jet fuel usage.
“The refining margin rose, recently surpassing $20 per barrel,” said Jo Sang-beom, head of the external cooperation team at Korea Petroleum Association, referring to the price difference between crude oil and oil products. “Demand for fuel and the refining margin could drop in the future if fuel prices continue to be too high, but we are looking forward to more consumption of fuel as more people drive to do leisure activities and due to an increase in international travel during the summer vacation.”
Since the government announced fully vaccinated travelers coming into Korea will not have to go through a mandatory 7-day quarantine on March 21, international flight bookings between that day and April 17 rose 133 percent on year on Interpark Tour.
“The Ministry of Land, Infrastructure and Transport plans to increase the number of international flights similar to 50 percent of the pre-pandemic rate by end of this year,” said a spokesperson for Korean Air Lines. “It will take time for airlines to increase the number of international flights, but bookings and travel demand is significantly rising.”
Automakers expect a rise in demand for cars as people are choosing to go on longer domestic trips, but keeping up with demand is a huge problem.
Customers have to wait a long time to get their cars after the order is placed due to the ongoing chip supply crisis, and the lockdown in Shanghai has only made situations worse. Local carmakers such as Hyundai Motor and Kia don’t have plants in Shanghai, but do get car parts supplied from companies in the city, which have been closed due to Covid restrictions since last month.
“It takes a maximum 18 months for customers to get their cars, and it seems like the wait will be longer in the future,” said a spokesperson for an automaker.
However, companies have hope. Hanwha Investment & Securities analyst Kim Dong-ha says the chip supply shortage will gradually ease starting in the second quarter, a problem that has been troubling automakers since 2020.
Home appliance makers saw a huge increase in sales as people forced to stay home during the pandemic spent more on TVs, but now, they are forecasting a gloomy outlook.
Kim Young-moo, director of Samsung Electronics’ visual display division, said “demand for home entertainment gadgets will shift to outdoor activities and travel” and that the company will focus on premium TV sales by targeting sports fans ahead of the September Asian Games and November Qatar World Cup.
E-commerce companies saw huge growth during the pandemic, but it’s now time for retailers with offline stores to enjoy the boom.
According to the Korea Chamber of Commerce and Industry, department stores will have a Retail Business Survey Index (RBSI) of 111 in the second quarter, up 9 points compared to the previous quarter.
An RBSI over 100 means the sector will see growth compared to the previous quarter.
Discount stores had a RBSI of 99, below 100, but jumped 17 points on quarter. Visitors were able to try food samples at discount stores starting April 25, one of the biggest profit drivers. Lotte Mart said sales of dumplings — a product they offer samples of to visitors — between April 25 and May 1 rose 30 percent compared to the period between April 11 and 17. The company didn’t compare it to the previous week because big discount stores have to shut every other Sunday.
Sales of fruits rose 25 percent and imported meats 40 percent.
“Due to lifted social distancing restrictions and pandemic regulations, businesses in travel, leisure, arts, hotels and retail and restaurant owners will see a huge increase in sales,” said Jeong Yeo-kyung, an analyst at NH Investment & Securities.
BY KIM KYUNG-MI, LEE TAE-HEE [firstname.lastname@example.org]