South Korea's Exports Surge to Record on Steel, Semiconductors

  • Shipments climb 11th month, steepest monthly jump since 2011
  • Trade Ministry expects exports growth could slow in 4Q
Photographer: SeongJoon Cho/Bloomberg

South Korean exports surged to a record last month in the latest sign that stronger global trade is helping to underpin growing momentum for the global economy. 

The nation’s shipments abroad rose for an 11th month in September, driven by overseas demand for steel, semiconductors and petrochemical products.

Key Points

  • Exports jumped 35 percent from a year earlier, the trade ministry said on Sunday. The median estimate of economists was for a surge of 25 percent.
  • Imports gained 21.7 percent, versus expectations for them to advance 20.6 percent.
  • The trade surplus was $13.8 billion, also a record.
  • Month-on-month growth in exports was the most since January 2011. 
  • There were 2.5 more working days in September compared with a year earlier and some companies pushed out shipment of products before 10-day Chuseok holidays starting on Oct. 1, the trade ministry said.

Big Picture

The better-than-expected data came after China announced its factory gauge hit a five-year high. The results also show that South Korea’s economy is demonstrating resilience even as the war-of-words between U.S. President Donald Trump and North Korean leader Kim Jong-un heightens tensions on the peninsular. 

Exports surged across most of 13 major categories, the trade ministry said. South Korea’s economy improved slightly in some regions in the third quarter, with domestic consumption driven by positive sentiment and the government’s job-creation policy, the Bank of Korea said last week. Geopolitical concerns surrounding North Korea and household debt remain as risks to the outlook, the central bank said. 

Export growth is projected to slow from October, the trade ministry said, as the U.S. Federal Reserve takes steps to reduce its balance sheet and other central banks are expected to reduce monetary stimulus. There will also be 6 1/2 fewer working days in South Korea in the fourth quarter of 2017 than there were in the year-earlier period, the ministry said.

Economist Takeaways

  • “Shipment of some vessels seemed to affect total exports value,” said Stephen Lee, economist at Meritz Securities. “Export growth is expected to slow to single-digit in the fourth quarter.”
  • “Although exports are at a record-high, this was mostly expected amid high demand for semiconductors and also because of the base effects from low oil prices a year earlier,” Jeong Wonil, economist at Yuanta Securities Korea, said by phone. “South Korea’s exports will probably be good until the end of this year, but it seems to be uncertain whether the strong cycle for the semiconductor industry will continue into 2018.”

Details

  • Shipments to the U.S. rose 28.9 percent, while those to China increased 23.4 percent; those to Asean nations grew 44.8 percent.
  • Exports to India surged 22.3 percent as South Korean products gained price competitiveness after the implementation of a goods and services tax in India started July 1.
  • By industry, exports of semiconductors rose 70 percent amid soaring DRAM chip prices
  • Shipments of steel jumped 107.2 percent, helped by rising steel prices and some shipments for large-scale projects, such as an offshore plant in Norway; petrochemicals gained 41.5 percent and petroleum products increased 49.5 percent, as prices climbed amid the disruptions to U.S. refineries following Hurricane Harvey.
  • Exports of automobiles advanced 57.6 percent, aided by base effects from a 19-day strike a year earlier and early shipments of automobiles before the Chuseok holidays
  • Exports of vessels rose 38.7 percent, with two value-added vessels shipped out in September
  • Exports of auto parts fell 6.4 percent amid slowing growth in U.S. motor vehicle industry; shipments of telecommunications devices and home appliances declined 15.9 percent and 15.6 percent, respectively.
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