Trade Surplus Recorded in June as Imports Fall Faster than Exports
In June, imports fell more steeply than exports, resulting in a monthly trade surplus for the first time in 16 months. The drop in energy imports, particularly crude oil and coal, can be attributed to the falling oil prices. Additionally, with the economic downturn, imports of intermediate goods used in the production of semiconductors and steel products have also declined. This has raised concerns about a potential “recession-type surplus.” Experts are unanimous in their agreement that the sustainability of this trade surplus depends on the recovery rate of global demand for key export items such as semiconductors.
Surplus of $1.13 Billion in June
According to the Ministry of Trade, Industry and Energy, June saw a trade surplus of $1.13 billion. This marks a significant shift from the previous 15 months of consecutive trade deficits, making it the longest period of trade imbalance in 27 years. The surplus is primarily due to the greater decrease (-11.7%) in imports compared to exports (-6.0%). Notably, energy imports, such as crude oil (-28.6%) and coal (-45.5%), saw a significant decline as a result of plummeting oil prices. Energy imports, which reached $18.5 billion during the Russia-Ukraine war, fell to just $9.99 billion in June, dipping below $10 billion for the first time in 21 months.
Additionally, the economic collapse has led to a worrying decrease in imports of other items. Intermediate goods like semiconductors (-19.5%) and steel (-10.2%) experienced sharp declines, resulting in an overall 7.1% drop in non-energy imports. The unexpected fall in energy prices has contributed to the early emergence of the trade surplus.
Challenges in the Export Sector
Exports, meanwhile, continue to face challenges, especially for key items like semiconductors. Semiconductor exports, the largest category in terms of value, plummeted by 28.0% compared to the same period last year. The decrease in memory semiconductor exports (-38.8%) can be attributed to the significant drop in the fixed price of DRAM, which fell from $3.35 to $1.36. Furthermore, exports of petroleum products saw a substantial decline of 40.9% due to the fall in oil prices.
While there were increases in exports for certain items like automobiles (58.3%), general machinery (8.1%), ships (98.6%), and rechargeable batteries (16.3%), the overall export volume failed to return to an upward trend.
Exports to China, the largest trading partner, have been declining for 13 consecutive months due to sluggish plant consumption in China and a preference for domestic products. Although the 19% drop in exports to China in June is the lowest figure this year, it is not significant enough to expect a drastic impact from China’s economic recovery.
Recovery of Global Semiconductor Economy Crucial
The level of recovery in the global semiconductor economy is expected to play a key role in the rebound of exports in the second half of this year. Although semiconductor exports have been experiencing a slowdown for the past 11 months, there are growing expectations for a turnaround as last month’s exports reached $8.9 billion, the highest figure this year. The Ministry of Industry foresees a gradual recovery in the semiconductor industry, thanks to visible effects in memory semiconductor production and increasing demand for DDR used in high-performance servers.
However, major economic institutions in South Korea remain cautious about the outlook. The Korea International Trade Association predicts a 3.1% decrease in exports and a trade deficit of $1.2 billion in the second half of this year. The Korea Institute of Industrial Trade and Economics expects a 5.2% decline in exports and a trade deficit of $6 billion for the same period. Despite the replacement of global data center facilities and expanding new demand, the Korea Institute of Industrial Economics and Trade predicts a 12.8% decrease in semiconductor exports.
External conditions are also unfavorable for both domestic and foreign exports. The announcement of additional interest rate hikes by the US Federal Reserve amidst the ongoing Russia-Ukraine conflict leads to a general consensus that economic recovery will remain limited. Professor Ha Joon-kyung from Hanyang University notes that the expected improvement in external conditions for the second half of the year has been delayed, with the US raising interest rates and China experiencing only a slight recovery.
Government’s Optimistic Outlook
In contrast, the South Korean government holds higher expectations for an “export plus” transition in the second half of the year. The monthly trade deficit, which reached its peak at $12.54 billion in January, has gradually decreased to $2.12 billion in May, finally turning into a surplus in June. The Ministry of Industry anticipates temporary slowdowns in the trend of improving the trade balance during July and August due to seasonal factors like summer holidays. However, they expect a continuous surplus trend and an overall increase in exports thereafter.
Ultimately, the fate of South Korea’s trade surplus relies heavily on the recovery of the global semiconductor economy in the coming months.
June 1.1 billion surplus… Due to the effect of falling oil prices, the decrease in imports is greater than in exports
Imports of intermediate goods fall due to sluggish semiconductor economy… Exports to China fall for 13th consecutive month
Imports fell more steeply than exports last month, and the monthly trade balance turned into surplus for the first time in 16 months. The decrease in energy imports, such as crude oil and coal, was mainly due to the drop in oil prices. Following the economic collapse, imports of intermediate goods used to produce semiconductors or finished steel products have fallen, and there are concerns about a ‘recession-type surplus’. Experts unanimously agreed that whether the trade surplus will continue depends on the speed of recovery in global demand for key export items such as semiconductors.
According to the Ministry of Trade, Industry and Energy on the 2nd, the trade balance recorded a surplus of 1.13 billion dollars (won about 1.49 trillion) in June. From March last year to May this year, the trade balance was in the red for 15 consecutive months. This was the longest period in 27 years since the 29th consecutive month of trade deficit between January 1995 and May 1997.
This time there is a surplus due to the fact that the decrease in imports (-11.7%) compared to the same period last year is greater than the decrease in exports (-6.0%). First of all, energy imports (-27.3%), such as crude oil (-28.6%), gas (-0.3%), and coal (-45.5%), fell significantly due to the impact of falling oil prices. Energy imports, once $18.5 billion due to the Russia-Ukraine war, recorded $9.99 billion last month, falling below $10 billion for the first time in 21 months since September 2021 ($9.9 billion).
The decrease in imports of other items due to the economic collapse is a cause for concern. Last month, as imports of key intermediate goods items such as semiconductors (-19.5%) and steel (-10.2%) fell, imports of non-energy items fell by 7.1%. An official from the Korea International Trade Association said, “Energy prices fell more than expected, so the trade balance shifted to surplus earlier.
The slowdown of key export items continues. Semiconductor exports, the largest export item last month, fell by 28.0% compared to the same period last year. The fixed price of DRAM, which was $3.35 in June last year, fell to $1.36, leading to a significant drop in memory semiconductor exports (-38.8%).
Exports of petroleum products also fell by 40.9% compared to the same period last year due to the fall in oil prices.
Exports increased by 7 items among the 15 major items, including automobiles (58.3%), general machinery (8.1%), ships (98.6%), and rechargeable batteries (16.3%), but it was not enough to return the export volume general to the upward trend. .
By region, the drop in exports to China last month was the lowest of the year at 19%, but it is still insignificant to expect the impact of China’s reopening (resumption of economic activity). Exports to China have been falling for the 13th month in a row due to slow plant consumption in China and a preference for domestic products.
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On the 2nd, Sinsondae Pier in Busan Port is full of containers. According to the Ministry of Trade, Industry and Energy, the trade balance recorded a surplus of 1.13 billion dollars in June. This is the first time in 16 months that the monthly trade balance has recorded a surplus. random news
Ultimately, the level of recovery of the global semiconductor economy in the second half of this year is expected to be key to a rebound in exports.
The growth rate of semiconductor exports has been slowing for the 11th month, but expectations for a turnaround in export growth are growing as last month’s exports recorded $8.9 billion, the most this year.
The Ministry of Industry said, “The semiconductor industry is expected to gradually recover from the second half thanks to the visible effects of memory semiconductor production and the increasing demand for DDR (a type of DRAM) used in high-performance servers .”
The outlook for major domestic economic institutions is cautious. The Korea International Trade Association predicted on the 28th of last month that exports in the second half of this year would decrease by 3.1% compared to the second half of last year, resulting in a trade deficit of $1.2 billion.
The Korea International Trade Association (KITA) explained, “Exports will turn to an upward trend from the fourth quarter, but it will not be enough to compensate for the decline in exports in the third quarter.” Last May, the Korea Institute of Industrial Trade and Economics also predicted that exports would fall by 5.2% in the second half of the year and that the trade balance would record a deficit of $6 billion. The Korea Institute of Industrial Economics and Trade predicted that semiconductor exports would fall 12.8% in the second half of this year despite the replacement of global data center facilities and the expansion of new demand.
In fact, the domestic and foreign export environment is not favorable. As the US Federal Reserve (Fed) announces an additional interest rate hike amid the long war between Russia and Ukraine, the general view is that the economic recovery will be limited. Ha Joon-kyung, a professor at Hanyang University, said, “The government expected external conditions to improve towards the second half of the year, but with the US continuing to raise interest rates and China barely recovering, the rebound delayed.”
In contrast, the government is raising expectations for an ‘export plus’ transition towards the second half of the year. The monthly trade deficit peaked at $12.54 billion in January, then gradually increased to $5.33 billion in February, $4.73 billion in March, $2.73 billion in April, and $2.12 billion in May, as it declined and turned black this time. The Ministry of Industry said, “In July and August, the trend of improving the trade balance may slow down temporarily depending on seasonal factors such as the summer holidays, but after that, we expect a full surplus trend and an increase in exports. “
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