Exports down 10.1% at semiconductor low... Cumulative trade deficit nears $30 billion (Comprehensive)

As of the 10th of this month, the cumulative trade deficit is approaching $30 billion, exceeding 60% of last year's level (-$47.23 billion). Although energy imports have decreased, the recovery has been delayed due to sluggish trade with China and semiconductor exports.

According to the Korea Customs Service on the 11th, the trade deficit from the 1st to the 10th reached $4.169 billion, marking the 15th consecutive month of trade deficits. The cumulative trade deficit stands at $29.412 billion, which is 62.3% of last year's figure. Exports (provisional customs clearance basis) amounted to $14.485 billion, down 10.1% compared to the same period last year, while imports were $18.654 billion, down 5.1%. Exports have been declining for eight consecutive months from October last year to this month. The number of working days during this period was 6.5, the same as the previous year. Considering working days, the average daily export value decreased by 10.1% to $2.23 billion.

The cumulative annual export value this year is $215.417 billion, and imports are $224.83 billion, representing decreases of 12.9% and 5.1%, respectively, compared to the same period last year. If the trade deficit continues until the end of this month, it will mark 15 consecutive months of deficits since March last year.

With summer approaching, energy imports have decreased due to stabilized international oil prices and a decline in liquefied natural gas (LNG) prices; however, semiconductor export sluggishness continues this month as well. As of the 10th of this month, semiconductor exports amounted to $1.975 billion, down 29.4% compared to the same period last year. This marks the 10th consecutive month of export decline since August last year (-7.8%), mainly due to falling prices of products such as DRAM this year.

Regarding the sluggish trend of semiconductors, Korea Development Institute (KDI) analyzed that Korea's semiconductor exports are more vulnerable to market fluctuations because the memory segment accounts for a large portion compared to the global market. In an issue analysis report titled "Recent Semiconductor Market Trends and Macroeconomic Impact" released on the 10th, KDI stated, "The recent semiconductor market downturn is driven by the memory segment," and noted that expanding the share of system semiconductors would help reduce market volatility. KDI also analyzed, "In past semiconductor market cycles, semiconductor production reached a low 3 to 6 months after inventory peaked," and added, "The recent inventory reduction suggests that production lows may form in the 2nd to 3rd quarters."

The trade deficit with China is also likely to continue for the 11th consecutive month. As of the 10th of this month, exports to China recorded $3.207 billion, a 14.7% decrease compared to the same period last year. Although the Chinese market has reopened, sanctions against domestic companies remain in place. Recovery within this year is expected to be difficult. According to the Korea Chamber of Commerce and Industry's report "Perceptions on the Sluggish Exports to China" released on the 10th, when asked about the timing of export recovery, 40% of 300 companies exporting to China predicted that recovery would take place "only after 2 to 5 years."

Nevertheless, the government expects South Korea's trade balance to improve in the second half of this year. On the 9th, at a press briefing held at the Government Sejong Complex marking the first anniversary of the current administration, Lee Chang-yang, Minister of Trade, Industry and Energy, said, "Since the second half of last year, the global economy has deteriorated, and our mainstay semiconductor industry has been hit and is facing difficulties," but added, "The trade deficit has been continuously decreasing since January, and we expect a period of surplus to appear from the second half of the year, with a positive turnaround in export growth rates."