Low Oil Prices Lead to Decline in March Export and Import Prices... Semiconductor Prices Rose but Outlook Remains Gloomy

Export Prices Down 3.1% After Removing Exchange Rate Effect
Semiconductor Export Prices Rebound... April Outlook Uncertain

[Asia Economy Reporter Kim Eunbyeol] Last month, South Korea's export price index fell by 1.1% compared to the previous month. Despite the rise in the won-dollar exchange rate, export prices declined mainly for coal and petroleum products and chemical products due to the sharp drop in international oil prices caused by the impact of the novel coronavirus disease (COVID-19). On a contract currency basis, it fell by 3.1% compared to the previous month. However, as semiconductor prices recovered, the export price of DRAM increased.

According to the "March 2020 Export and Import Price Index" released by the Bank of Korea on the 14th, the export price index in March was 96.59, down 1.1% from the previous month. Although the export price index rebounded in February compared to the previous month, it returned to a downward trend. Compared to the same month last year, it fell by 3.3%, continuing a decline for 10 consecutive months.

The decline in export prices in March was largely influenced by the drop in international oil prices. Prices of manufactured goods such as coal and petroleum products (-26.8%), chemical products (-2.1%), and primary metal products (-1.0%) fell, resulting in a 1.1% decrease compared to the previous month. The export price of agricultural, forestry, and fishery products rose by 2.0% compared to the previous month.

Kang Hwang-gu, head of the Price Statistics Team at the Economic Statistics Bureau of the Bank of Korea, explained, "Not only coal and petroleum products, which are directly affected by the decline in oil prices, but also prices of primary metal products fell as prices of precious metal raw materials such as copper and nickel declined."

Semiconductor export prices rose compared to the previous month. DRAM export prices increased by 3.1% month-on-month, and flash memory rose by 4.5%. Export prices of LCDs (liquid crystal displays) for TVs increased by 6.9%. Kang said, "Semiconductor export prices have shown an upward trend for two consecutive months, and although the decline compared to the same month last year has significantly narrowed, the future is uncertain. Since the global economy is in recession due to COVID-19, we need to wait and see how things will unfold."

It is notable that export prices in March fell despite the rise in the exchange rate. Last month, the average won-dollar exchange rate was 1,220.09 won, up 2.2% from February (1,193.79 won). Therefore, when removing the exchange rate effect and looking at export prices on a contract currency basis, the decline was even greater. Export prices on a contract currency basis fell 3.1% month-on-month and 9.9% year-on-year. The month-on-month decline in export prices on a contract currency basis was the largest since December 2014.

Last month, the import price index was 100.84, down 5.2% from the previous month, marking a decline for three consecutive months. It also fell 7.7% year-on-year, continuing a downward trend for two consecutive months. The sharp drop in international oil prices significantly affected the raw material import prices, which fell by 17.7% month-on-month. The declines in crude oil (-36.5%) and naphtha (-39.0%) were particularly large. The average Dubai crude oil price last month was $33.71 per barrel, down 37.8% from the previous month ($54.23).

Import prices on a contract currency basis fell 7.3% month-on-month and 14.1% year-on-year. Kang said, "Although the decline in import prices due to falling oil prices may improve trade terms in March, this is a result of the economic recession caused by COVID-19, so it should not be interpreted positively."

This content was produced with the assistance of AI translation services.