Oil & Semiconductors
Korea’s export volume index turned for a rise for the first time in four months. The country’s net terms of trade index also rebounded for the first time in 27 months as a drop in its imports eclipsed a drop in its exports.
According to the Trade Index and Terms of Trade for June 2023 (in U.S. dollar terms) released by the Bank of Korea (BOK) on June 27, the export volume index stood at 126.90 (100 in 2015) in June, up 7.5 percent from June 2022. The index had been declining for three consecutive months since March this year and turned positive for the first time in four months in June.
Korea’s export value index fell 9.2 percent from a year earlier to 126.85, extending its decline to nine consecutive months. Its import volume index rose to 125.85, up 4.4 percent from the same month 2022, marking the first time in four months that the index turned positive. Its import value index was 147.37, down 12.0 percent year on year. This was the fourth consecutive month of a decline.
The import and export value index is an indicator of import and export value in current dollars divided by import and export value at the reference point (2015), while the import and export volume index is an indicator of import and export value divided by import and export volume index.
In June, Korea’s net terms of trade index stood at 85.36, up 0.2 percent from a year earlier. The index turned positive for the first time in 27 months, with import prices (-15.7 percent) falling more than export prices (-15.5 percent). On a month-on-month basis, the index rose 2.4 percent.
“This was because a decline in import prices was bigger than a decline in export prices due to the expansion of the base effects of international oil prices and a slowdown in semiconductor prices,” said Seo Jeong-seok, head of the price statistics team at the BOK.
In fact, according to the BOK, the volume of Korea’s semiconductor exports ascended from 8.1 percent in May to 21.6 percent in June on a year-on-year basis. The value of its exports also dropped 28.0 percent in June compared to 35.7 percent in May, showing a slowdown in its descent.
“An increase in Korea’s export volume in June can be explained by an increase in its exports of transportation equipment, semiconductors, and chemicals,” Seo said. “In the case of semiconductors, there are signs of price rebounds in some products when observing the flow of market prices that affect fixed prices.”
With both Korea’s export volume index and net terms of trade index climbing, Korea’s income terms of trade index rose to 108.32 in June, up 7.7 percent year on year.