If the Korean Air-Asiana exchange rate rises by 100 won, the valuation loss is only 630 billion won per year.

Companies are going through a tunnel of ‘zero clock’ due to high interest rates and exchange rates. An employee checks the indicators in the dealing room of Kookmin Bank in Yeouido, Seoul on the 23rd, when the 40-day gain-dollar exchange rate fell to 1,409 won 30, and the KOSPI index fell 1.81% to 2290.00. Reporter Kim Beom-jun “/>

Companies are going through a tunnel of ‘zero clock’ due to high interest rates and exchange rates. An employee checks the indicators in the dealing room of Kookmin Bank in Yeouido, Seoul on the 23rd, when the 40-day gain-dollar exchange rate fell to 1,409 won 30, and the KOSPI index fell 1.81% to 2290.00. Reporter Kim Beom-jun

The US central bank’s (Fed) increase in the benchmark interest rate and the resulting strong dollar is spilling over into domestic companies. As the cost of raw materials and logistics increases this year and the exchange rate increases, every company is alarmed and convenes an emergency response meeting to respond to the high exchange rate. The high exchange rate has been a factor in improving the competitiveness of export products, but the current high exchange rate is a sign of economic recession. There is growing concern that corporate profitability could decline significantly due to the sudden high interest rate and high exchange rate as soon as it leaves the low interest rate zone for a long period of time.

○ Busy preparing countermeasures against sudden fluctuations in the exchange rate

According to the business world on the 23rd, major companies are busy analyzing exchange rate scenarios and preparing countermeasures. In particular, with the forecast that the exchange rate could rise to 1,500 won per dollar early next year, companies are struggling, saying they have to scrap all existing business plans and make some new.

An official from the electronics industry said, “The market is moving well beyond the expected exchange rate and interest figures. He sighed, saying, “Not to mention next year’s business plan, we are in a position to re-examine the plan for the fourth quarter, which starts a week later, from scratch.” An official from LG Energy Solutions said, “The volatility of the dollar is a bigger problem than the increase in the exchange rate. It is very difficult to make a stable business plan.”

Korean Air and Asiana, if the exchange rate rises 100 won, only the valuation loss is 630 billion won per year

In particular, companies that have to pay raw material prices in dollars are having a lot of trouble. One of them is the food manufacturing industry, which imports raw materials such as wheat, oils and fats, and coffee beans from abroad and processes and sells them. Many companies regret delaying the purchase of raw materials because the gain has been increasing all the time. A food industry official said, “During the first half of the year, international grain prices jumped due to the war between Russia and Ukraine, and there was a delay in buying ingredients.

The airline industry, which has a lot of dollar debt for importing aircraft, is also a representative industry that suffers from high exchange rates. If the exchange rate rises 100 won, only Korea Air and Asiana Airlines will lose more than 600 billion won in foreign currency valuation. Asiana Airlines and low cost carriers (LCC), which operate mainly in Asian countries, are in a situation where interest rates are rising and high exchange rates are being ‘linked’ while traffic with China and other countries has not ‘to resolve adequately.

The steel industry, which buys iron ore and coal from abroad, and the oil refinery, which imports and refines crude oil, have also been hit hard. The price of iron ore imported by POSCO was $126 per ton in the second quarter, up 31.2% from last year’s fourth quarter ($96). As raw material prices fluctuate and the exchange rate increases, the cost of purchasing raw materials is very likely to rise further in 3Q.

○ “Next year’s topic is cost reduction”

Businesses agree that the strong dollar will not change easily. This is because the Fed has a strong will to control inflation, and there are many reasons why the dollar has no choice but to strengthen, such as the Russia-Ukraine war and the conflict between the United States and China. Kim Hyung-joo, a senior research fellow at the LG Business Research Institute, said, “The current high exchange rate is not due to a liquidity crisis as it was during the foreign exchange crisis or the financial crisis.

Companies benefiting from the sudden increase in the exchange rate are also not so bright. Automotive, shipbuilding and semiconductor industries with a high proportion of exports. In the second quarter, Hyundai Motor recorded 2.154 trillion won in sales and 641 billion won in operating profit as a result of exchange rate appreciation. However, a Hyundai Motor official said, “The biggest problem is that the car doesn’t sell no matter how much money is paid in dollars.” he was worried. Sung-tae Jeong, a researcher at Samsung Securities, said, “In a situation where demand is shrinking due to the economic downturn, the sense of crisis caused by the general recession is greater than the direct exchange rate gains and losses .”

Companies protect against exchange rate risk in various ways, such as diversifying supply chains, diversifying payment currencies, and subscribing to derivatives. SPC Group announced that it is considering a plan to pay for raw materials imported from outside the United States, such as French butter and Australian wheat, in local currency instead of dollars.

Lee Sang-eun/Park Han-shin/Hankyung Reporter selee@hankyung.com

Leave a Reply

Your email address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.