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Freight containers fill a port in this undated photo. (ClipartKorea)

South Korea’s exports were down for a second straight month in February, continuing a trend of five months of stagnation.

The balance of trade has also remained negative for 12 months running.

On Wednesday, the Ministry of Trade, Industry and Energy (MOTIE) released a provisional report on import and export trends for the month of February. The figures showed export value totaling US$50.1 billion, down by 7.5% from the same month in 2022, while imports stood at US$55.4 billion, a rise of 3.6%. The balance of trade amounted to a deficit of US$5.3 billion.

This is the first time the South Korean trade balance has remained negative for a full year since the period from January 1995 to May 1997, which came just before the Asian financial crisis of the late 1990s.

The five consecutive months of decline in the dollar value of exports has also been an unusual trend. The last time this happened was during the early stages of the COVID-19 pandemic between March and August 2020.

The cumulative trade deficit for January and February amounted to US$17.95 billion, or 38% of last year’s total annual deficit of US$47.785 billion.

Minister of Trade, Industry and Energy Lee Chang-yang characterized the situation as a “trend of declining exports due to reduced import demand in major countries stemming from the global economic slowdown, along with falling semiconductor prices.”

“The trade deficit arose in a situation where energy imports have remained high due to seasonal winter demand,” he added.

The MOTIE also said another factor in the declining trend for exports was the baseline effect compared with the same month in 2022, when exports recorded an all-time February high of US$54.16 billion.

Semiconductor export value was down by 42.5% amid a slump in industry conditions and a resulting tumble in prices. At US$5.96 billion, the total value of exports in semiconductors — South Korea’s single biggest export — was down by US$4.4 billion compared with February 2022. That amount was even higher than the US$4.1 billion decline in all exports for the same month.

Export performance was similarly dismal for other information technology categories including displays (-40.9%) and computers (-66.4%). Petrochemical export value also fell by 18.3%.

In contrast, automobile exports were up by 47.1% to US$5.6 billion, a value roughly on par with semiconductor exports. Exports also increased in the categories of petroleum products (12.0%) and rechargeable batteries (25.1%).

At 24.2%, the decline in exports to China was especially striking. It was the ninth consecutive month that the dollar value of exports to China fell.

“Owing to the global economic downturn, there has been an ongoing decline in exports to China, in which China exports have fallen for most categories apart from wireless communications,” the MOTIE observed.

Between Feb. 1 and 25, South Korea’s semiconductor exports to China were down by 39.0%, with other sharp decreases observed for displays (-43.5%) and petrochemicals (-29.5%). Exports to the US and European Union were up by 16.2% and 13.2%, respectively.

The rise in imports was attributable mainly to the energy sector. During February, South Korea’s energy imports were up by 19.7% compared with the same month in 2022. Non-energy-related imports fell by 1.5% over the same period.

“Crude oil imports were down slightly due to falling oil prices, but there was an increase in gas imports to provide a stable energy supply during the winter,” the MOTIE explained.

Jeong Man-ki, vice chairperson of the Korea International Trade Association, predicted that the trend of poor export performance would “continue through the first half of the year.”

“If we take into account adjustments in semiconductor supplies and China’s [economic] reopening, we can expect the situation to start improving around May or June,” he suggested.

“While it’s not a good thing to have deficits add up too much,” he added, “we should also look at the deficit as a percentage of the overall scale of trade.”

Based on this analysis, the deficit at the time of the Asian financial crisis or past petroleum shocks amounted to around 7%–8% of all trade, while the current deficit comes out to just around 2%.

Commenting on the declining semiconductor prices, the MOTIE predicted, “While the trend is expected to continue for now, there is a possibility of a rebound in the second half of the year due to the effects of reduced investment by major businesses and new server CPU demand.”

According to MOTIE data, the fixed price of a DRAM semiconductor dropped from US$3.41 in January–April 2022 all the way to US$1.81 in January–February 2023. The fixed price of a NAND semiconductor slipped from US$4.81 in January–May 2022 to US$4.14 for the period from October 2022 to February 2023.

By Kim Young-bae, staff reporter

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