50 Days of the Ukraine War... Cement and Steel Prices Rise, Electronics Fall

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[Asia Economy Reporter Lee Myunghwan] It has been 50 days since Russia's invasion of Ukraine. While concerns over raw material supply due to the war have driven up indices related to cement and steel significantly, the electrical and electronics index showed the largest decline. The securities industry expressed concerns that the prolonged war would burden the South Korean economy.

According to the Korea Exchange on the 18th, among the individual indices in the KOSPI market from the outbreak of the Ukraine war on February 24 to April 15, 50 days after the invasion, the non-metallic minerals index rose 11.23%, showing the largest increase. This index includes cement-related stocks such as Sungshin Cement, Ssangyong C&E, and Hanil Cement. With the sharp rise in thermal coal prices due to the war, concerns over cement supply increased, and expectations of price hikes led to continuous rises in related stocks.

During the same period, the steel and metal index also rose 8.64%. Due to the war, local power supply shortages are expected to reduce steel production, which pushed stock prices upward. Park Seongbong, a researcher at Hana Financial Investment, predicted, "The global steel price strength centered on Europe and the United States due to supply chain reductions caused by the war will continue for the time being."

On the other hand, the electrical and electronics index fell 6.19%, showing the largest decline during this period. This is explained by concerns over raw material supply centered on secondary batteries. This index includes secondary battery-related stocks such as LG Energy Solution, Samsung SDI, and Solus Advanced Materials. Lee Changmin, a researcher at KB Securities, explained, "Western countries' sanctions against Russia have intensified concerns over raw material supply, while various costs such as raw material prices and logistics expenses have increased," adding, "The stock prices of secondary battery material sectors plunged an average of 12.8% over two weeks after concerns about the Ukraine invasion became serious."

The securities industry analyzed that the prolonged war would burden the South Korean economy. Jeon Gyuyeon, a researcher at Hana Financial Investment, analyzed, "The longer the war continues, the greater the global economic losses will be," and added, "Since equipment investment and intellectual property investment have been the main drivers of economic recovery after COVID-19, increased uncertainty could reduce investment and limit growth."

There was also analysis that the earnings outlook for stocks that rose due to the war effect is not entirely positive. Rajin Seong, a researcher at Daol Investment & Securities, pointed out, "Thermal coal price increases are expected to be resolved within the first half of the year," and added, "Due to the sharp rise in thermal coal prices, a conservative approach is needed for the cement industry's earnings in the first half."

Meanwhile, during the war period, telecommunications (8.82%) and machinery (8.45%) rose, while medical precision (-2.52%) and textiles and apparel (-2.47%) declined.

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