"Q3 Export 'Dark Clouds'... Due to Prolonged Russia-Ukraine War and Rising Prices"

Martial Arts, Export Industry Business Sentiment Index (EBSI) Released

Q3 at 94.4... Below 100 Indicates Deterioration Outlook

Export Companies Cite "Challenges: Rising Raw Material and Logistics Costs"

[Asia Economy Reporter Moon Chaeseok] Due to the prolonged Russia-Ukraine war and the global rise in prices, there is a forecast that South Korea's exports in the third quarter will somewhat deteriorate.

The Korea International Trade Association's Institute for International Trade and Commerce announced the results of the '3rd Quarter Export Industry Business Outlook Survey' conducted on 1,301 domestic export companies on the 26th. The survey showed that the Export Business Sentiment Index (EBSI) for the third quarter was 94.4. Companies predicted that the perceived business conditions would worsen compared to the second quarter. An index below 100 means that export conditions are expected to be worse than now.

By product category, indices for 11 items such as automobiles and auto parts (61.4), plastic and rubber products (68.4), and steel and non-ferrous metals (74.2) fell below 100. The KITA cited recent rises in oil and raw material prices and global supply-demand instability as factors expanding global uncertainty.

On the other hand, exports of ships (149.3), semiconductors (114.3), and chemical industrial products (111.3) are expected to expand in the third quarter. KITA analyzed that the steady order flow in the shipbuilding industry and increased semiconductor demand and supply shortages will contribute to export improvement. Medical, precision, and scientific instruments (102.4) and electrical and electronic products (99.7) are expected to maintain levels similar to the second quarter.

In the evaluation of export environment, seven out of ten items, including 'manufacturing cost of export goods' (69.1), 'international supply-demand situation' (70.4), and 'economic conditions of export destination countries' (83.1), are expected to worsen in the future export environment. Items such as 'export contracts' (105.6), 'export consultations' (102.8), and 'facility operation rate' (102.2) are expected to continue similarly or slightly improve compared to recent trends.

Regarding export difficulties in the third quarter, the most common responses were 'raw material price increase' (84.9%) and 'logistics cost increase' (74.4%). It was found that the export industry as a whole is under cost pressure. In particular, the difficulty of 'exchange rate volatility expansion' (32.7%) increased by more than 10 percentage points compared to the previous quarter (22.5%). This is expected to act as a pressure factor on our export companies.

Kim Min-woo, senior researcher at KITA, said, "Global uncertainty will increase further due to worldwide price rises and accelerated US interest rate hikes. Our companies need to enhance product competitiveness so that manufacturing cost increases can be reflected in export prices, while also thoroughly managing risks such as currency hedging and preemptive securing of raw materials."