In March 2022, the index of all industry production increased, including mining & manufacturing industries and service industry.
Despite a minor adjustment in semiconductor production, the production of mining & manufacturing industries grew for six consecutive months, driven by food & beverage (for quarantine at home) and ship industries. The average capacity utilization rate of the manufacturing industry recorded the highest level in nine years and two months at 78.9%. The service industry production posted the biggest rise in nine months, boosted by increases in the sales of financial products and by more outdoor activities resulting from a lift of social distancing restrictions.
The retail sales of nondurable goods* including food, beverage and medicine increased as opposed to those of durable goods* resulting from the considerable base effect* of the previous month. Equipment investments both in machinery and transport equipment fell due to supply chain disruptions.
The overall industrial activities in March continued to recover especially on the production side with industrial production rebounding thanks to the joint recovery of mining & manufacturing industries and service industry. However, the expenditure side lagged behind due to situations at home and abroad including the spread of omicron and supply chain disruptions.
Nevertheless, the improving economic sentiment—buoyed by the continued double-digit growth rates in export, the recent fall in new COVID-19 cases and a lift of social distancing restrictions—is expected to have a positive impact on the index trend. Considering the persisting domestic and international uncertainties—including the heightening inflation pressure, lengthened crisis in Ukraine, concerns of worsening supply chain disruptions caused by China’s lockdown, and the possibility of accelerated monetary policy shifts by major countries—the South Korean government while making the best effort to manage risks on national and international levels is committed to implementing policies to stabilize consumer prices for people’s livelihood and to keep the economy on the recovery track.
※ Source: Ministry of Economy and Finance (moef.go.kr)
Industrial Trends by Industry
Auto Domestic consumption in March increased by 19.2% year-on-year due to disruptions in production. The resurge of COVID-19 cases in China caused difficulties in sourcing parts, leading to a fall in production volume and a drop in domestic car sales by 21.2%. The number of registered imported cars increased by 28.1% from the previous month but decreased by 8.7% from the previous year due to persisting supply shortage. . Domestic consumption in March increased by 19.2% year-on-year due to disruptions in production. The resurge of COVID-19 cases in China caused difficulties in sourcing parts, leading to a fall in production volume and a drop in domestic car sales by 21.2%. The number of registered imported cars increased by 28.1% from the previous month but decreased by 8.7% from the previous year due to persisting supply shortage.
Shipbuilding Exports in March decreased by 35.9% year-on-year, resulting from the rapid drop in the exports of ships including high-value gas carriers. In contrast to brisk exports in 2021, South Korea’s shipbuilding industry suffered from tumbling ship orders in 2020 due to COVID-19 and the subsequent decrease in ship deliveries.
General machinery Exports in March continued growth for the 13th month to stand at USD 4.855 billion by recording an all-time high for the month of March and growing by 3.0% year-on-year. Despite the worsening crisis in Ukraine dragging down exports to Russia (-44.7%) and to Ukraine (-98.1%), the active investments in construction, transportation and digital infrastructure by advanced countries helped sustain the upward export trend in construction equipment, processing and machine tools.
Steel In March, exports rose by 26.8% year-on-year, driven by the recovery of global demands and the continued increase in export unit prices. Exports exceeded USD 3 billion for ten consecutive months thanks to the recovery of and supply disruptions in EU’s construction industry, the increase in the capacity utilization rates of the construction and auto industries of South America, India and the Middle East, and the continued rise in global steel prices.
Oil refining The worsened geopolitical instability widened the growth rate of oil prices and export unit prices. In February, domestic consumption increased by 3.9% due to the rising demand of lubricating oil and aviation fuel while the export volume grew by 12.2% (3.0% year-on-year) driven by brisk exports of transportation petroleum products including gasoline, diesel, aviation fuel and lubricating oil. In March, exports surged 90.1% year-on-year, buoyed by higher unit prices and increased volumes.
Petrochemical In March, exports continued growth, boosted by rising demands in downstream industries and higher unit oil prices. Petrochemical industry exports achieved the best-ever record by reaching USD 5.42 billion. The continued recovery of downstream industries including construction and auto helped the exports of synthetic resin, synthetic rubber and others continue the upward trend. Exports grew evenly in major export destinations including China, ASEAN, Japan and the Middle East, supported by the rising demand of hygienic products and higher unit prices boosted by increasing global oil prices.
Wireless communication devices In March, exports increased by 44.5% year-on-year, driven by the strong growth of the global mobile phone market, the increase in component prices and the new product releases by major South Korean players. Exports to China, the US and Europe grew by 79.8%, 50.8%, and 40.9% respectively, supported by the increased exports of premium products such as foldable phones (priced USD 400 or higher) and by the growth of the nation’s market share in the mid- to low-priced phone market.
Semiconductor Exports in March rose by 38.0% year-on-year to stand at USD 13.118 billion, recording an all-time high monthly export value. Exports grew for the twentieth consecutive month since July 2020, as well as surpassing USD 10 billion for eleven straight months. Each month, growth rates exceeded 24.0% from April 2021 to March 2022 to maintain the steep upward trend. * During the period, the growth rate was highest in August 2021 at 42.6% and lowest in February 2022 at 24.0%
Display Exports in March increased for 12 consecutive months, growing by 48.4% year-on-year driven by the rising added value of smartphone panels. The increase in panel prices raised LCD exports by 14.1% while OLED exports grew for nineteen straight months since September 2021, posting a growth rate of 71.8% backed by stronger demands of high value-added OLED panels including LTPO and foldable panels.
※ Source: Korea Institute for Industrial Economics and Trade(kiet.re.kr)
**This article is extracted from Invest KOREA Magazine May, 2022.