Low Oil Prices Lead to Decline in March Export and Import Prices... Export Prices Hit Lowest in 3.5 Years (Comprehensive)

Impact of COVID-19 and Oil Price Crash
Export Prices Down 1.1% Month-on-Month
Import Prices Also Down 5.2% Month-on-Month

[Asia Economy Reporter Kim Eunbyeol] Last month, South Korea's export price index fell by 1.1% compared to the previous month. Due to the impact of the novel coronavirus disease (COVID-19) and low oil prices, export prices dropped to their lowest level since September 2016. Although DRAM export prices rose as semiconductor prices recovered, the semiconductor sector is also expected to be hit by COVID-19, leading to a negative outlook for this year.

According to the "March 2020 Export and Import Price Index" released by the Bank of Korea on the 14th, the March export price index was 96.59, down 1.1% from the previous month. This is the lowest level since September 2016 (93.50). 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 main factor pulling down export prices in March was the sharp drop in international oil prices. Last month, the average monthly price of Dubai crude oil was $33.71 per barrel, down 37.8% from the previous month ($54.23). As a result, manufactured goods, centered on coal and petroleum products (-26.8%), chemical products (-2.1%), and primary metal products (-1.0%), fell by 1.1% compared to the previous month. Export prices of agricultural, forestry, and fishery products rose by 2.0% compared to the previous month. Kang Hwan-gu, head of the Price Statistics Team at the Bank of Korea's Economic Statistics Bureau, explained, "Not only coal and petroleum products, which are directly affected by oil prices, but also prices of precious metal raw materials such as copper and nickel declined, causing primary metal product prices to fall as well."

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 the year-on-year decline has significantly narrowed, but the future is uncertain," adding, "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 fell in March 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, after removing the exchange rate effect, export prices based on contract currency fell even more sharply. Export prices based on contract currency fell by 3.1% month-on-month and 9.9% year-on-year. The month-on-month decline in contract currency-based export prices 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 decline for two consecutive months. The sharp drop in raw material import prices by 17.7% month-on-month, influenced by the decline in international oil prices, had a significant impact. The declines in crude oil (-36.5%) and naphtha (-39.0%) were particularly large. Last month, the average monthly price of Dubai crude oil was $33.71 per barrel, down 37.8% from the previous month ($54.23).

Import prices based on contract currency fell by 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.