Korean Companies' Concerns Mounting

South Korean enterprises’ concerns are mounting as the won-dollar exchange rate keeps rising.

South Korean enterprises’ concerns are mounting over the soaring won-dollar exchange rate.

According to industry sources, Korean Air’s profit decreases by 41 billion won each time the rate rises 10 won per U.S. dollar. “In April and May, the average exchange rate was 1,251.11 won, up 11.6 percent from a year ago,” one of them said, adding, “In other words, the exchange rate decreased the company’s profit by more than 500 billion won in that period alone.” This is because the company leases aircraft and purchases fuel in dollar.

Likewise, oil refining companies and steelmakers are facing an increasing burden in that they purchase raw materials such as crude oil and iron ore in dollar. Although they receive payments in dollar as well, a high exchange rate is burdensome anyway. The same applies to Korea Shipbuilding & Offshore Engineering, Samsung Heavy Industries and Daewoo Shipbuilding & Marine Engineering, which are dependent on imported shipbuilding raw materials.

Raw materials for Samsung Electronics and SK Hynix are becoming expensive as well although their product prices are rising at the same time for the exchange rate. Their concerns lie in semiconductor manufacturing equipment in particular as they are highly dependent on imported equipment.

Meanwhile, consumer electronics and IT product manufacturers are relatively freer from the impact as their overseas production ratios are high. Still, it is also true that the ongoing global inflation is leading to a decline in demand to increasingly affect them.

In the automotive industry, Hyundai Motor Co. and Kia are enjoying the rising exchange rate to some extent. As for Hyundai, overseas sales account for about 80 percent of the total sales and, in the first quarter of this year, the exchange rate led to an increase in operating profit of approximately 550 billion won. Auto parts manufacturers, in contrast, cannot enjoy the same as their sales are derived at home in most cases. Car importers are already being affected by logistics costs as well as the exchange rate.

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