FocusSouth Korea faces slower export growth on market uncertainty

22 December 2011 03:50  [Source: ICIS news]

SINGAPORE (ICIS)--South Korea’s export growth is expected to slow down in 2011 and 2012 because of uncertainty in the key China market, the eurozone debt crisis and the bearish economic outlook in the US, an analyst said on Thursday.

South Korea’s petrochemical exports for November grew by 10.9% year on year to $3.5bn (€2.7bn) on higher prices, said Eungju Lee, a petrochemical industry analyst at Seoul-based Shinhan Investment Corp.

The country’s volume of overseas shipments of most petrochemical products in November increased on a year-on-year basis, data from Korea International Trade Association (KITA) showed.

“The major factor for the trade value increase is because of an increase in overall prices and higher oil prices,” Lee said.

For aromatics, the exports of benzene rose by 1%, while toluene shipments more than doubled to 78,829 tonnes. (please see table below)

South Korea’s outbound shipments of propylene surged by 74.4%, while its exports of ethylene increased by 17.47%, the data showed.

Paraxylene (PX) exports firmed by 68.2% to 182,371 tonnes, but the country’s exports of naphtha fell by 11.67%.

South Korea’s total exports remained resilient amid a worsening global financial crisis, recording a 13.8% year-on-year increase to $47bn because of strong growth for major export items, according to data released from the Ministry of Knowledge Economy.  

The exports of most of South Korea’s key export items, including petroleum products, general machinery, automobiles, steel, automobile parts, household appliances, petrochemicals and textiles, showed strong growth in November compared with the same period in 2010, according to MKE.

The ministry said the country has remained in trade surplus for 22 consecutive months and its exports increased by 20.5% year on year for the first 11 months compared with the same period the previous year, totalling $509bn.

Its exports to China and the Association of South East Asian Nations (ASEAN) increased by 3.4% and 13.2% respectively, accounting for 38.3% of South Korea’s total exports for the month, MKE said.

For the month of October, China and the ASEAN countries accounted for 75.1% of South Korea’s total exports.

“South Korea’s export [market] is largely affected by Chinese demand,” Lee said.

Asia’s petrochemical market relies heavily on market conditions in China and the current lull demand in the country is squeezing the margins of regional petrochemical companies, Lee added.

“We have a cautiously optimistic view on next year’s Chinese demand,” he said.

“The [country’s] policy is forecasted to shift to domestic consumption and hopefully the demand for petrochemical products will increase,” he added.

On 12 December, South Korea lowered its economic growth forecasts for 2011 and 2012, expecting a 3.8% growth this year and 3.7% in 2012, lower than its previous forecasts at 4.5% for both years, the Bank of Korea said.

This reflects slower export growth amid weakening consumer and investment confidence, stemming from the worsening eurozone sovereign debt problems, the Bank of Korea added.

In addition, the Asian Development Bank said in its Asian economic monitor report that the region’s economies are facing “much greater downside risks” now because of the possibility of a recession in the US and Europe, and the threat of destabilising capital flows.

“South Korea slashed its economic growth forecasts for this year and next because of the eurozone debt crisis and the slowdown in developed nations, which is [hampering] its export sector,” said Singapore-based UOB Economic-Treasury Research.

($1 = €0.77)

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By: Samuel Wong

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