Export Plummets 27% from April 1-20, 'Wingless Fall' (Comprehensive)

Major Items Like Semiconductors, Cars, and Petroleum Products Plunge
Daily Average Down 16.8%... Export Value Also Drops by $300 Million
Car Exports, Highly Dependent, Down 28.5%
Car Parts Also Fall Sharply by 49.8%

[Image source=Yonhap News]

[Asia Economy Reporter Moon Chaeseok] Due to the impact of the novel coronavirus disease (COVID-19), exports from April 1 to 20 plummeted by 26.9% compared to the same period last year. Most major export items such as semiconductors, passenger cars, and petroleum products collapsed due to the global demand decline caused by COVID-19.

According to the Korea Customs Service's announcement on the 'Export and Import Status from April 1 to 20 (provisional customs clearance basis)' on the 21st, exports during this period amounted to $21.7 billion, down 26.9% ($7.99 billion) from the same period last year. As the impact of COVID-19 spread worldwide, global trade stagnation, economic slowdown, and falling oil prices dealt a severe blow to exports.

The average daily export amount, considering the number of working days, also decreased by 16.8%. Since the number of working days dropped from 16.5 days last year to 14.5 days this year, it is difficult to attribute the overall export decline solely to fewer working days. The average daily export amount was $1.5 billion, $300 million less than the $1.8 billion during the same period last year.

By export item, semiconductors (-14.9%), passenger cars (-28.5%), petroleum products (-53.5%), wireless communication devices (-30.7%), and automobile parts (-49.8%) all declined. By country, major trading partners such as China (-17%), the United States (-17.5%), the European Union (EU, -32.6%), Vietnam (-39.5%), Japan (-20%), Hong Kong (-27%), and the Middle East (-10.3%) all experienced negative growth.

Imports also decreased due to trade stagnation caused by COVID-19. Imports from April 1 to 20 amounted to $25.2 billion, down 18.6% ($5.75 billion) from the same period last year. Crude oil (-50.1%), machinery (-11.8%), and coal (-40.2%) decreased, while information and communication devices (6.5%) and passenger cars (15.8%) increased. Imports from China (-3.5%), the United States (-13.2%), the EU (-12.4%), Japan (-16.4%), and the Middle East (-51%) declined, with only imports from Singapore (2.4%) increasing.

The sharp drop in exports up to the 20th of this month is because factories and stores in Korea's major trading countries closed as COVID-19 spread worldwide. As demand plummeted, manufacturing exports took a direct hit, with automobile factories such as Hyundai and Kia shutting down. Although exports in March only decreased by 0.2%, the impact of COVID-19 appears to have intensified from April. With recovery difficult to expect immediately, dark clouds have gathered over export prospects not only for this month but also for the second quarter of this year.

[Image source=Yonhap News]

In particular, the automobile industry, which is highly dependent on exports, is facing a crisis. Passenger car exports dropped from -7.1% compared to the same period last year until the 10th of this month to -28.5% within just 10 days. Automobile parts also saw a larger decline, from -31.8% to -49.8%. The shutdown of domestic and overseas complete vehicle factories such as Hyundai and Kia, as well as the suspension of overseas production facilities by the three major tire companies including Hankook Tire, are believed to have influenced this decline. According to the April export results announced by the Korea Automobile Manufacturers Association on the 19th, automobile exports are expected to decrease by 43% to 126,589 units compared to 222,337 units in the same month last year.

Semiconductor exports, which had been holding up well, also decreased by 14.9%. Petroleum product exports (-53.5%) also sharply declined due to the fall in international oil prices. A Ministry of Trade, Industry and Energy official stated, "Until March, our exports performed better than other countries, but from April, the impact of COVID-19 seems to be appearing. The sharp drop in international oil prices has increased concerns about global oil demand, leading to a decrease in exports of petroleum products and petrochemicals."

The export outlook for the second quarter has noticeably declined. The Korea International Trade Association's Export Business Survey Index (EBSI) for the second quarter dropped to 79.0, falling below 80 for the first time since 2013. Export companies expect to be directly hit by shutdowns in major markets such as the United States and Europe in the second quarter.

The problem is that this export slump is also expected to negatively affect South Korea's first-quarter gross domestic product (GDP) growth rate. According to the Korea International Trade Association, exports accounted for 44% of Korea's GDP in 2018. The export shock inevitably has a significant impact on GDP. With the Bank of Korea scheduled to announce the first-quarter GDP growth rate on the 23rd, the prevailing forecast is for negative growth, and the possibility of negative growth extending into the second quarter has increased.

Professor Jeong In-gyo of Inha University's Department of International Trade said, "The fact that our exports only decreased by 0.2% year-on-year last month was because orders placed two to three months ago were still being fulfilled, but overseas new orders have virtually stopped since the spread of COVID-19, and this has started to be reflected in export performance from April. Given the current situation where factory shutdowns in major countries have spread, companies must operate emergency survival systems more seriously than now."

Professor Choi Won-mok of Ewha Womans University Law School warned, "The global demand contraction is just beginning, and consumer sentiment is freezing solid, so the negative impact will worsen over time. Second-quarter exports are expected to deteriorate further, and a situation where exports literally 'halve' must be anticipated."