Car sales drive Korea to trade surplus, exports fall again

Containers stacked up at a port in Busan on July 2. Korea logged a trade surplus for the second month in a row in July on strong car exports. [JOONGANG PHOTO]

Korea logged a trade surplus for the second month in a row in July on strong car sales and a drop in oil prices.

Exports plunged 16.5 percent to $50.33 billion last month from a year earlier, the steepest fall since May 2020 and the 10th consecutive month of falling exports on an annual basis, data by the Ministry of Trade, Industry and Energy showed on Tuesday.

Car exports jumped 15 percent on year last month, a jump for the 13th consecutive month. Exports of general machinery were also up 3 percent and home appliances were up by 2.5 percent.

Exports were dragged down by semiconductors that dwindled 34 percent, a jump from negative 28 percent in June. Exports for petroleum products were down 42 percent, petrochemicals by 25 percent and steel by 10 percent on year.

“A weak chip sector, a fall in petroleum products and petrochemicals due to a decline in crude oil prices and the base effect of record exports last July [$60.2 billion] attributed” to the weak exports, said the ministry in a statement.

The West Texas Intermediate Crude Oil Price traded around $80 in late July, down from almost $100 in the same month last year.

A fall in chip prices and sluggish imports by intermediaries in China and Vietnam also dragged down Korea’s exports. The trade balance with China stood at $1.27 billion in deficit, down from $1.30 billion in deficit a month earlier. The trade deficit with China has been narrowing since March.

Exports to Asean countries, the United States and the European Union plunged 22.8 percent, 8.1 percent and 8.4 percent, respectively.

Imports were down 25.4 percent to $48.71 billion in July on year, leaving Korea’s trade balance at $1.63 billion, wider than the $1.13 billion in June.

Gas imports dropped 51 percent, followed by crude oil and coal that both plunged 46 percent.

“The trend of trade surplus is materializing,” said Lee Chang-yang, Minister of Trade, Industry and Energy in a statement. He attributed the surplus to a “gradual recovery of chips” and vowed to strengthen the foundation to expand exports by attracting foreign investment and providing government support to industries, including semiconductors and reusable batteries.

“Depletion of chip inventory and increased shipments, according to Statistics Korea data for June, are optimistic signs,” said Jeong Yeo-kyung, an economist at NH Investment & Securities, in a report on Tuesday. “But Korea’s exports are projected to fall 9 percent in the third quarter due to a continuous drop in chip prices.”

Korea has previously posted a trade deficit for 15 months in a row through May, the longest run of monthly trade deficit in 27 years.

BY JIN MIN-JI [jin.minji@joongang.co.kr]