Strong Performance in Semiconductors, Automobiles, and Petrochemicals
Need to Prepare for Negative Impact from Rising Raw Material Prices
[Sejong=Asia Economy Reporter Joo Sang-don] Last month, export value surged by more than 45% compared to a year ago, marking the largest increase in 32 years. With COVID-19 vaccinations underway and the global economy recovering, key export items such as semiconductors, automobiles, and petrochemicals performed well. The fundamentals of our exports have become even stronger, surpassing the base effect. However, there is an analysis that it is necessary to prepare for potential negative impacts on our exports due to the recent upward trend in raw material prices, through cost reduction measures.
The Ministry of Trade, Industry and Energy announced on the 1st that exports in May reached $50.73 billion, an increase of 45.6% compared to the same month last year. This growth rate is the highest since August 1988, 32 years ago.
Exports have been rising for seven consecutive months since November last year (3.9%). This is the first time in 3 years and 2 months since March 2018 that exports have increased for seven consecutive months. Notably, the growth rate exceeded 40% for two consecutive months (April 41.2%, May 45.6%) for the first time ever. By item, 12 categories including semiconductors, automobiles, and petrochemicals showed double-digit growth rates. Semiconductor exports increased by 24.5% year-on-year, marking 11 consecutive months of growth. Export value surpassed $10.04 billion, exceeding $10 billion for the first time since 2018. Automobiles also rose by 93.7%, recording the highest growth rate in 14 years and 8 months.
Professor Kang In-su of the Department of Economics at Sookmyung Women’s University said, "The export boom is due to increased expectations for economic recovery as COVID-19 vaccination rates rise worldwide, including in Korea. Although it is not a revenge consumption, some pent-up demand is being released, which has influenced the strong performance of Korean exports."
Last month’s exports also increased significantly in quantitative terms, showing double-digit growth (15.6%) for the first time in 14 months. For the first time since September 2017, both export unit prices (25.9%) and export volumes, the two pillars of exports, increased in double digits. Professor Sung Tae-yoon of Yonsei University’s Department of Economics evaluated, "The rise in both prices and volumes indicates growing overseas demand for Korean products."
Exports increased evenly across regions. Besides China (22.7%), the United States (62.8%), and the EU (62.8%), ASEAN (64.3%), Japan (32.1%), Latin America (119.3%), India (152.1%), the Middle East, and CIS all showed growth in the nine major regions.
Last month’s import value recorded $47.81 billion, up 37.9%. The trade balance maintained a surplus for 13 consecutive months at $2.93 billion.
However, the recent sharp rise in raw material prices could negatively affect our exports. Kang Nae-young, senior researcher at the Korea International Trade Association, said, "A 10% increase in raw material prices will cause a 0.7% rise in export unit prices and a 0.25% decrease in export volumes. Companies need to continuously strive to secure competitiveness through company-wide cost reduction efforts such as management innovation and production process improvements in preparation for rising raw material prices, as well as developing high value-added products."
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