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KOREA REPORT - NOVEMBER, 2022.

TOPICS.

President Yoon arrived in Bali, Indonesia, on 14th, for a three-day visit to attend Group of 20 (G-20) summit. On 14th, Yoon took part in SKorea-Indonesia business roundtable and B-20 summit involving businesses from G-20 nations. On 15th, he attended first day of G-20 summit, and gave speeches at one session on food, energy, and security, and another on health. Before arriving in Bali, Yoon attended multiple summits in Cambodia with ASEAN nations, the US, Japan and China. President Yoon on 11th unveiled the country's first Indo-Pacific strategy for freedom, peace and prosperity for the region, at biannual ASEAN summit. Yoon highlighted the importance of maintaining peace and stability in the Indo-Pacific region, which has gained increasing strategic importance amid the US-China competition, and said any unilateral change in the status quo by force should not be tolerated. Experts here say Korean version of the Indo-Pacific strategy shows that SKorea has aligned its diplomatic course to lean toward the US, and conflict with China may be inevitable.

Saudi Arabia's Crown Prince and PM Mohammed bin Salman arrived in Seoul on 17th to hold talks with President Yoon and top business leaders, initiating a slew of agreements worth an estimated $30 bil between the two countries. The crown prince’s trip to Seoul is his first in three years. In a closed meeting, the two agreed to develop bilateral relations into a “future-oriented strategic partnership” and establish a “strategic partnership committee” at the leadership level to promote cooperative projects more systemically. Yoon said he hoped to “further expand and develop cooperation” with Saudi Arabia in various sectors, including $500 bil Neom City project, among others. Read more…

The nationwide strike by truck drivers caused supply disruptions across the cement and steel industries, with other sectors like auto and petrochemicals feared to bear the brunt if the protest prolongs. Cement factories were unable to ship most of the daily supply of 200,000 tons the previous day. The strike delayed the cement deposit work at construction sites across the country, and the ready-mix cement producers said they will have to suspend operation. Truck drivers went on strike on 24th, the second strike this year in less than six months, after staging an eight-day walkout in June, which resulted in massive delays in cargo shipments and production disruptions worth around KW1.6 tril ($1.21 bil) in damage. They demand that the government extend temporary rules guaranteeing minimum freight rates, citing high fuel prices. The rules are set to expire at the end of this year. Read more…

NK's latest firing of more than 10 ballistic missiles, one of which landed south of the de facto maritime border for the first time, reflects the regime's confidence in its military capabilities and its determination to cement its status as a nuclear-armed state, Seoul-based experts said on 2nd. The short-range ballistic missile that crossed Northern Limit Line fell into high sea 57 km east of SKorea’s eastern city of Sokcho and 167 km northwest of Ulleung Island near Dokdo. Experts viewed the unprecedented provocation as a possible "prelude" to further raise military tensions in the region before NK carries out its seventh nuclear test. NK will likely to continue to ratchet up military tension on the Korean Peninsula, as it would want to cement its status as a nuclear-armed state, with its seventh nuclear test as a finale. Pyongyang would then want to lead negotiations directly with the US, holding its status as a nuclear-armed state, experts said.

SKorea recorded trade deficit of $7.01 bil in Nov, eighth straight month of deficit, ringing an alarm over its growth momentum. Outbound shipments fell 14% on-year to $51.91 bil, due to global economic slowdown and logistics disruptions over a truckers' strike. Imports grew 2.7% on-year to $58.93 bil on high global energy prices. Overseas sales of semiconductors tumbled 29.8% on-year to $8.45 bil on falling demand and the drop in chip prices. Sales of petrochemicals also fell 26.5% to $3.55 bil and exports of steel products decreased 10.6% to $2.99 bil. Exports of ships sank 68.2% to $1.12 bil. Car exports jumped 31% to $5.4 bil, an all-time monthly high, and sales of petroleum products advanced 26% to $4.88 bil.

Corporate Korea is betting big on Indonesia’s $34 bil capital relocation plan as they are expected to play leading role in building futuristic infrastructure for smart city and flying cars. During G20 summit, SKorea and Indonesia signed total of 10 MOUs on 14th to boost economic partnership between two countries, whose official ties will reach the 50th anniversary next year. The 10 agreements, consisting of six government and four private led projects, cover range of topics across sectors, including digital transformation, carbon-free energy transition and resources and infrastructure development. Korean businesses pinned especially high hopes on Indonesian leader Joko Widodo’s pet project, relocating country’s capital city from Jakarta to Nusantara, new forest city on island of Borneo. Read more…

SKorea's foreign reserves increased $2.09 bil on-month to $416.1 bil as of end Nov, as the dollar-converted value of holdings rose thanks to the greenback's fall, according to Bank of Korea. It marked the first growth in four months. The dollar index weakened about 3.5% in Nov. Of the total reserves, foreign securities, such as US Treasuries, were valued at $365.62 bil, which accounted for 87.9% of total foreign reserves. The value of deposits stood at $26.68 bil. SKorea was ranked world's ninth-largest holder of foreign reserves as of end Oct.

Bank of Korea raised its policy rate by 0.25% to 3.25% on 24th, returning to its usual pace of tightening as growth and credit markets falter in the face of 24 year high inflation. BOK policymakers expect the rate to peak at 3.5%, noting it was too premature to discuss loosening policy.

SKorea’s consumer prices rose 5% on-year in Nov, according to Statistics Korea. It marked the lowest on-year increase since 4.8% tallied in April. Price of utility services gained 23.1% on-year, amid soaring energy prices sparked by prolonged war between Russia and Ukraine. The price of agricultural, fisheries and livestock products moved up 0.3% on-year, sharply slowing from Oct's on-year rise of 5.2%. Industrial product prices increased 5.9% on-year, with those of processed foodstuffs and petroleum products rising 9.4% and 5.6%, respectively. Core inflation rose 4.3% on-year in Nov.

Korea’s Big3 released their 3Q business results. KSOE posted revenue of KW4.26 tril ($2 bil), operating profit of KW189 bil and net profit of KW316 bil in third quarter. The sales increased by 1.8% on-quarter and succeeded in turning into a surplus. Its sales, operating profit, and net profit in third quarter all increased by 19.9%, 33.2%, and 64% on-year, respectively. SHI posted net loss of KW202 bil in July-Sept period. Sales fell 5.7% on-year to KW1.4 tril, with operating loss growing to KW167.9 bil from a loss of KW110.2 bil a year earlier. DSME logged revenue of KW981 bil, operating loss of KW628 bil and net loss of KW647 bil in third quarter. The sales decreased 17% on-quarter, but showed 2.3% on-year upturn. DSME's operating loss increased more than six-fold compared to second quarter, and by 33 times against a year ago. Its net loss also saw increase from KW176 bil in 2Q 2022 and KW54.5 bil in 3Q 2021.

Despite market disorientation caused by high shipbuilding prices and economic downturn, KSOE has shown excellent performance in new order sales this year. KSOE has been awarded 190 newbuilds worth $22.82 bil, so far this year, 130.8% of its annual goal. Last year, KSOE surpassed its goal by 53%. Park Seung-yong, senior executive VP of HHI, said “The Group secured 42 LNG carriers, 51 large container vessels, and 43 small boxships. Nearly 80% of newbuildings that were ordered at HHI and HSHI were dual-fueled vessels as compared to last year’s 40%.” The slots for LNG carriers in HHI and HSHI are booked until end of 2026, and not taking new order enquiries for 2027 deliveries actively since the cost is uncertain. However, slots for 2025 for conventional commercial vessels (container ships, tankers, etc) are not full yet.

Korea Shipbuilding Industry Cooperative (KOSIC) recently announced that its member, Asia Shipbuilding and KOSTEC consortium, have won a wind-assisted propulsion supply vessel worth KW5.4 bil ($4.0 mil) from German International Cooperation Agency (GIZ). With dimensions of 48m in length, 8.7m in width and 4.1m depth, the new vessel is expected to be delivered in Oct 2023. The 285 dwt vessel will be equipped with large-sized sail to minimize carbon emissions from diesel engine. After completion, GIZ plans to donate the newbuilding to Marshall Islands. Also, the German corporation is going to purchase additional sister ships and donate them to countries such as Fiji and Micronesia in the future. Read more…

Korean Big3 have started developing small nuclear reactors. KSOE signed $30 mil investment contract with TerraPower on 4th. SHI signed MOU with Danish Seaborg in April for developing floating nuclear power plants based on Seaborg’s compact molten salt reactor (CMSR). DSME signed MOU with Kepco E&C for floating nuclear power plant development cooperation. Read more…

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