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Korea trade volume sees sharp drop among OECD members

China’s delayed recovery pulls down exports, surging oil prices threaten imports

By Im Eun-byel

Published : Sept. 24, 2023 - 15:45

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Containers wait at Shinseondae Port in Busan on Sept. 21. Korea saw a sharp drop in its trade volume in July. (Yonhap) Containers wait at Shinseondae Port in Busan on Sept. 21. Korea saw a sharp drop in its trade volume in July. (Yonhap)

South Korea’s exports in July dropped by the fourth-largest amount among the Organization for Economic Cooperation and Development's member countries, hit by China's sputtering economy, while its imports showed the sharpest fall among them, data showed Sunday.

Korea’s export volume in July dropped by 15.5 percent on-year, according to data compiled by the OECD.

The drop was the fourth largest among the 38 OECD countries excluding Colombia, whose data has not been added yet. Korea was behind Norway, which saw its exports drop by 50.2 percent, Estonia by 19.4 percent and Lithuania by 16.4 percent.

Among the seven countries dubbed the “30-50 club” -- those with per capita gross national income surpassing $30,000 and a population of over 50 million including the US, UK and Japan -- Korea saw the largest drop in its outbound shipments.

Korea's slow exports were affected by the sagging Chinese economy. Its exports to China, which takes up around 20 percent of the country's total exports, has been on a decline for 14 months straight as the Chinese economy has been unable to make recovery.

China, a major trade partner for Korea, accounted for 20.9 percent of the total trade volume and 19.6 percent of total exports from January to July. China-bound shipments took up 45 percent of the total exports in the semiconductor industry during the period.

Korea's inbound shipments dropped by the largest amount among OECD countries in July, dipping 25.4 percent on-year. It was the only OECD nation which showed an over 20 percent decline in its monthly imports in the period.

Countries such as Finland, which saw a 17.9 percent decline in its exports in July and Japan at 17.4 percent, followed on the list.

The decrease in Korea’s inbound shipments in July stems from dips in energy and raw material prices seen earlier this year. Korea's imports of three major sources of energy -- crude oil, gas and coal -- which account for some 20 percent of its total imports, dropped by 47 percent on-year in July.

With surging international oil prices, the import volume is likely to rebound soon.

After hitting $100 per barrel following the Russian invasion of Ukraine, the prices of crude oil dropped to $70 per barrel earlier this year, but have been on the increase since the oil production cut decision from major oil producers.

Due to the steep rise in international oil prices, the weekly average prices of gasoline and diesel here both climbed for the 11th consecutive week, putting pressure on the Korean economy, heavily dependent on energy imports.

According to Opinet, a website operated by the state-run Korea National Oil Corp, the average retail price of gasoline in Korea stood at 1,776.3 won ($1.33) per liter from Sept. 17-21, 16.7 won higher than the previous week. The average retail price of diesel stood at 1,676.8 won, up 21.5 won.

Yet the jump in oil prices is expected to continue, haunting the Korean economy, pressured by high interest rates and weak currency.

In a research report published on Friday, investment bank JP Morgan projected that the recent oil price resurgence could push Brent crude prices to range between $90 and $110 a barrel in 2024, potentially driving it up to $150 by 2026.