S Korea economy grows 1.8% in Q1; YoY petchem exports fall

SINGAPORE (ICIS news)--The South Korean economy grew 1.8% in the first quarter, propelled by higher growth in the manufacturing and construction sectors, the country’s central bank said on Tuesday.

However, overall petrochemical exports declined in the first quarter compared with the previous year, as fewer cargoes left for the major buyer China after the Lunar New Year holidays as well as due to lower production capacities caused by plant shutdowns of key producers, analysts said.

According to official data, the country’s manufacturing sector posted a 3.6% increase in the first quarter ending 31 March 2010, reversing a contraction of 1.7% in the October-to-December period of 2009.

"This was mainly due to an upturn in electrical and electronic equipment manufacturing such as semiconductors and electronic products," the central bank said.

The country’s construction sector, meanwhile, rose 1.6% in the first quarter, compared with a fall of 0.6% in the last quarter of 2009.

Other major sectors of the economy – utilities and services – also improved from the last quarter of 2009.

Agriculture, forestry and fishing, on the other hand, registered a 4.4% fall in the first quarter, reversing a 0.4% increase in the last quarter of 2009.

Investments in facilities such as machinery and transport equipment rose 1.5% from the previous quarter, while those in construction increased 0.9% mainly due to civil engineering projects, the central bank said.

South Korean exports grew 3.4% in the first quarter, mainly due to an upswing in shipments of cars, semiconductors and LCDs, it said.

However, the year on year figures were not an accurate depiction on the current export conditions due to the low base in the first quarter of 2009 when exports were quite low due to the economic downturn, said Lim Ji-Soo, a petrochemical analyst at brokerage house Shinhan Investment in Seoul.

According to South Korean exports data compiled by ICIS news, petrochemicals exports fell around 6.6% year on year in February, while March cargoes dropped by about 6.8%.

On a month on month basis, March shipments for petrochemicals rose about 11% from the previous month, while February cargoes rose around 5% from January, according to data compiled by ICIS news.

Looking ahead, petrochemical exports were likely to dip in the second quarter due to increasing plant shutdowns, Lim said.

"LG chem shut down one of its key plants in March and Yeochun NCC Co (YNCC) will do so in the second quarter. There will not be enough petrochemicals products to export," Lim added.

Overall imports, meanwhile, rose 5.4%, mainly led by an increase in imports of machinery, the central bank said.