Steel, EVs face uncertain future amid global economic slowdown

[JOONGANG PHOTO]

Only the food and aviation industries are seeing sunny days ahead, as more than half of the domestic industry-leading companies in the country’s 10 largest industries have reported smaller on-year operating profits as of the third quarter, according to the business forecast analysis released by Joongang Ilbo on Wednesday.

The Joongang Ilbo analyzed 21 companies' revenue and operating profits based on their statements of affairs, selecting the top three highest-earning companies in each industry including information technology, automobiles, batteries and shipbuilding.

Amid the global economic slowdown, 12 companies saw lower operating profits on year. Seven companies had lower revenue, making it hard to stay optimistic about next year’s prospects. Only two industries — food and aviation — saw sunny days, as illustrated in the graphic above.

Market bellwether Samsung Electronics saw its revenue drop by 17.5 percent and operation profits drop 89 percent as of this year’s third quarter, compared to last year. But the overall outlook for the electronics industry is “partly sunny" due to the revival in demand for semiconductors.

The aviation industry is one of the few other sectors with a sunny forecast. A rise in revenue and operating profits is expected as Covid-19 regulations come to an end. “The number of passengers in 2024 will at least reach the same level as in 2019,” said Myoung Ji-un, research analyst at Shinhan Financial Group.

The outlook for the automobile industry, which had a great year, is less bright. As of this year’s third quarter, Hyundai Motor and Kia both saw their revenues jump almost 20 percent and their operating profits explode twice over on year.

But the dominant forecast for next year is that demand in the automobile market will either slightly increase or slow down, and that demand for electric vehicles will shrink.

“In the process of a global growth recession, a profit growth momentum slowdown is inevitable in 2024, as high interest rates persist and competition in the electric vehicle market intensifies,” said Cho Soo-hong, a research analyst at NH Investment & Securities.

Amid the cloudy forecast for the EV market, cold winds also hit the battery industry. Domestic battery companies, which previously scrambled to enter North America, have been adjusting production expansion plans and redeploying manpower since the start of the second half of this year.

The shipbuilding industry is chugging along nicely in the high-value-added vessel and eco-friendly vessel sectors, but is largely lagging behind China’s dominant market share as it grows on the back of the Chinese government’s support.

The forecast for the steel industry is dark with rainy days ahead. This is because the economy of China, the biggest steel consumer in the world, has not yet been revived. China’s decline in consumption, which heavily damaged sales of semiconductors last year, also hit domestic exports for oil refining and chemical products — which are Korea’s second and third largest exports, respectively. Korea’s leading oil refining and petrochemical companies, SK Innovation and GS Caltex, both saw their operating profits drop more than 60 percent on year.

Domestic distribution and food industries aren’t faring well either. Daishin Securities lowered the target stock price of Emart, Korea’s largest retailer chain, from 110,000 won ($85) to 95,000 won on Wednesday, stating that its subsidiaries' sluggish performance had undermined the company's value.

The food industry is getting on better thanks to increased exports, as Korean food becomes more popular overseas. Exports for agricultural and processed foods including instant noodles and kimchi have increased 1.2 percent on year as of last month, according to the Ministry of Agriculture, Food and Rural Affairs.

Experts say the biggest problem is that the next generation's major breadwinning industries, following semiconductors and automobiles, have not at all found their footing.

“We are still reliant on major [export] products from 20 years ago such as memory semiconductors, automobiles and petrochemicals,” said Seok Byoung-hoon, economics professor at Ewha Womans University. “If we do not aggressively break the mold, it will be difficult to break out of the trend of long-term low growth,” he added.

BY LEE HEE-KWON [kim.juyeon2@joongang.co.kr]