Exports Step Backwards in August for 1st Time in 3 Months

Due to partial strikes of the automobile industry including Hyundai-Kia Motor, exports declined last month.

The Ministry of Trade, Industry and Energy announced on Sept. 1 that exports in Aug. were projected to be US$46.311 billion, a 0.1 percent decrease compared to last year. Exports this year have grown in June (2.5 percent) and July (5.4 percent) after the 1.5 percent decline in May, but stepped backward again for the first time in three months. Kwon Pyung-oh, director of trade investment at the Ministry of Trade, Industry and Energy, explained, “The number of working days is one day less this year than last year, and strikes in the automobile industry also contributed to the decrease in exports. But, the average export amount per day increased from US$1.97 billion last year to US$2.06 billion this year.”

By products, exports of automobiles dropped the most by 16.9 percent compared to the previous year. As the labor union of Hyundai-Kia Motor has rejected overtime work, production has declined. The adjustment of vacation days also affected. The Ministry of Trade, Industry and Energy explained that US$300 million in exports decreased due to the one day decrease in working days, and that summer vacations and strikes dropped US$900 million and US$450 million of exports respectively. Automobile and automobile components account for about 14 percent of the total exports of Korea.

On the other hand, other major export items besides automobiles continued to show growth in exports. Steel exports rose by 9.5 percent during the same period of time, thanks to the market recovery in the U.S. and China. Exports of wireless telecommunication devices also increased by 8.7 percent due to the rising supplies of the LG G3 smartphone. Vessels (7.5 percent), petroleum products (6.7 percent), petrochemical products (5.6 percent), and semiconductors (5.1 percent) showed growth as well.

By region, exports to advanced countries were good. Exports to the U.S. and E.U. grew by 7.1 percent and 9.7 percent, respectively. However, exports to China have dropped for four consecutive months since May. Since China is actively investing in infrastructure facilities, their own production of steel and petroleum products is rising. This means that Chinese demand for Korean products are decreasing.

Imports increased by 3.1 percent to US$42.872 billion won last month, compared to the previous year. After the 1.2 percent decline in January, imports this year have continued to grow for seven consecutive months.

By product, imports of raw materials including crude oil, petroleum products, steel, and consumer goods such as automobiles primarily increased, but imports of capital goods including machinery facilities decreased. In the case of crude oil, the total import amount increased due to an increase in both import price and quantity.

The trade balance, which is calculated by subtracting imports from exports, scored US$3.47 billion won in August, showing a continuous surplus for 31 consecutive months. Korea achieved a trade surplus from China and the U.S., but a trade deficit from Japan and the E.U. However, as exports to China are constantly declining, the trade balance could become volatile later.