"Fivefold Burdens Including Rising Logistics Costs Continue to Weigh on Companies Next Year"

FKI Conducts Survey on 'Economic Indicator Forecasts Affecting Corporate Management' Targeting Heads of Securities Firms' Research Centers

Data provided by the Federation of Korean Industries

[Asia Economy Reporter Kim Heung-soon] A survey has revealed that five economic indicators affecting corporate management?energy, raw materials, logistics costs, environmental costs, and interest rates?are expected to continue increasing the burden on companies next year.

The Federation of Korean Industries (FKI) announced on the 3rd that this outlook was confirmed through a recent survey of 27 heads of securities firms' research centers. The center heads identified the most negative economic indicator currently impacting corporate management as the "rise in energy and raw material prices (60.8%)." This was followed by "increase in shipping and logistics costs (15.7%)" and "cost increases due to environmental regulations (13.7%)."

Crude Oil and Natural Gas Expected to Reach Peak Prices in Q1 Next Year

Respondents forecast that West Texas Intermediate (WTI) crude oil prices will rise from $47.62 per barrel on January 4 next year to a maximum of $92.71, representing a 94.7% increase compared to the beginning of the year.

Natural gas prices are also expected to continuously rise from $2.58 at the start of the year to a maximum of $6.31, approximately 2.5 times (144.6%) higher than the beginning of the year. 52.9% of respondents anticipate that crude oil and natural gas prices will peak in the first quarter of next year.

Although opinions suggest that crude oil and natural gas prices will somewhat decline in the second half of next year after the first quarter, the Korea Economic Research Institute (KERI) explained that prices will still remain high compared to early this year, indicating ongoing corporate burdens.

Raw Material Prices Expected to Peak in First Half of Next Year
Shipping and Logistics Costs to Peak in Q4 This Year... Remain High Next Year

The center heads projected that copper prices, a representative raw material, will rise from $7,919 per ton at the beginning of the year to a maximum of $11,663, a 47.3% increase compared to the start of the year. Aluminum prices are expected to rise even more sharply from $1,922 per ton to a maximum of $3,238, up 68.5%.

The proportion of respondents who identified the short-term peak for copper and aluminum prices as "the first half of next year" was 47.1% and 50.0%, respectively. Those who answered "the second half of next year" accounted for 35.3% and 43.8%, respectively, leading KERI to expect that the management burden from rising raw material prices will continue next year.

The center heads forecast that the Shanghai Containerized Freight Index (SCFI), representing container ship freight rates, will rise from 2,870 points (p) on January 8 to a maximum of 4,773p, a 66.3% increase. The Baltic Dry Index (BDI), indicating bulk carrier freight rates, is also expected to rise from 1,347p on January 4 to 5,371p, a 298.7% increase.

Most forecasts suggest that both the SCFI and BDI indices will peak in the fourth quarter of this year and then decline next year. However, the projected values for the second half of next year are expected to be 20.3% and 185.8% higher than the beginning of this year, respectively. Accordingly, while companies may experience some relief, KERI anticipates that it will be difficult to completely escape the burden of shipping and logistics costs next year.

Data provided by the Federation of Korean Industries

Carbon Emission Permit Prices Expected to Rise Until End of Next Year
Majority of Respondents Expect Korean Base Interest Rate Hike by Year-End

The center heads predicted that the price of carbon emission permits traded on the securities exchange, "KAU21," will steadily increase from 23,000 KRW per ton at the beginning of this year to 36,438 KRW in the second half of next year. The maximum price is expected to reach 38,219 KRW in the second half of next year, a 66.2% increase compared to the start of this year. KAU21 rose from its lowest point of 11,550 KRW on June 23 this year to 30,400 KRW as of October 29.

Previously, the government introduced the carbon emissions trading system in 2015, assigning carbon emission quotas to companies. If companies exceed these quotas, they must purchase emission permits on the market, with transaction amounts increasing sharply each year. Consequently, corporate burdens related to carbon neutrality are expected to grow.

Regarding interest rates, all respondents forecast that the Korean base interest rate will rise from the current 0.75% to 1.00% by the end of the year, a 0.25 percentage point increase. Among respondents, 76.5% expect the rate to reach 1.25% in the first half of next year, and 64.7% anticipate it will exceed 1.50% in the second half. For the U.S. base interest rate, a majority of center heads (52.9%) expect it to remain at the current 0.25% until the end of next year. Meanwhile, 17.6% foresee the U.S. rate rising gradually by 0.25 percentage points in both the first and second halves of next year, starting from 0.25% at the end of this year.

Kim Bong-man, head of international cooperation at FKI, said, "We hope the government will alleviate corporate pain through policy support such as fuel tax reductions. Since small and medium-sized enterprises are more affected by recent rises in energy, raw materials, and logistics costs, appropriate support measures are necessary."

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