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KOREA REPORT - MAY, 2023.
TOPICS.
Japanese PM Fumio Kishida arrived in Seoul on 7th for two-day working visit, less than two months after March summit in Tokyo. He was the first Japanese leader to make a bilateral visit to Korea in 12 years after former PM Yoshihiko Noda, amid warming bilateral ties after Yoon's visit to Tokyo, also the first by SKorean leader in 12 years. Kishida said he felt heartbroken at the thought of Korean laborers at Japanese companies during Japan¡¯s 1910-45 rule of Korean Peninsula, but did not directly apologize for their treatment or for forcing them into work. President Yoon said that Seoul would not ¡°unilaterally demand¡± that Tokyo issue an apology for the rights abuses in particular, referring to agreement reached with Kishida on March 6th. Read more¡¦
SKorea successfully conducted the third launch of homegrown Nuri rocket on 25th, as satellite launch vehicle reached targeted altitude and released satellites into orbit, marking another space milestone. Nuri rocket completed flight sequence as it reached an altitude of 550 km at a speed of 7.6 kps in 783 sec, or 13 min and 3 sec, after blastoff from country¡¯s southern coast at 6:24 pm. Unlike first and second launches, Nuri rocket¡¯s third mission carried country¡¯s second next-generation small satellite named NEXTSat-2 into orbit, along with seven other cube satellites. Hanwha Aerospace participated in Nuri rocket¡¯s third launch as system integration company. Korea Aerospace Research Institute will continue to transfer knowledge of assembling Nuri rocket and launch operations to Hanwha with three more launches through 2027.
COVID-19 will no longer be classified at the highest degree of emergency in SKorea from June, three years and four months after its designation as such. President Yoon on 11th declared an end to almost all COVID-19 restrictions, including mandatory isolation. Yoon said the seven-day mandatory isolation period for COVID-19 patients will be reduced to a recommendation of five days. Yoon also said the indoor mask mandate will be lifted everywhere except for hospitals with rooms for hospitalization, and the national crisis level for COVID-19 will be lowered from "serious" to "alert." The measures came days after World Health Organization declared an end to the pandemic as a "global health emergency."
NK¡¯s attempt to launch its first-ever military reconnaissance satellite into orbit ended in failure on 31st, and briefly put SKorea and its neighbors on high alert when it disappeared from the planned trajectory. It was later found to have crashed into the sea. In a rare move, Pyongyang promptly acknowledged the failure of its attempt, but said it would conduct another launch ¡°as soon as possible,¡± adding more pressure on SKorea. NK fired a projectile at 6:32 am. The projectile, which NK claims is a space launch vehicle, was launched in southwesterly direction, setting off warnings across regions in South, including Seoul.
The US is expected to become SKorea¡¯s top trading partner for the first time in 20 years, replacing China, according to Trade Ministry on 5th. SKorea¡¯s exports to China in April decreased by 26.5% on-year to $9.52 bil. The country's exports to the US, on the other hand, reached $9.18 bil. The gap between SKorea¡¯s exports to China and the US narrowed to just $340 mil in April from $1.15 bil in Jan. In 2021, SKorea¡¯s exports to the US accounted for only 58% of the exports to China. But, Korea¡¯s exports to the US in April 2023 accounted for 96% of those to China.
SKorea suffered a trade deficit of $2.1 bil in May, due mainly to weak demand for semiconductors amid an economic slowdown. Outbound shipments fell 15.2% on-year to $52.24 bil. The exports of semiconductors sank 36.2% on falling demand and a drop in chip prices. Imports fell 14% on-year to $54.34 bil, as country's energy imports went down 20.6% on-year. Imports have exceeded exports in SKorea since April last year on high energy prices, and it is the first time since 1997 that the country has logged a trade deficit for 15 months in a row.
Posco International said on 10th it is planning to secure a 174,000 cbm LNG carrier to boost its LNG business value chain. It signed a long-term charter contract with H-Line Shipping. Posco noted that a self-operating LNG carrier will help manage production, storage, and generation of gas more efficiently. The ship will be constructed by Hyundai Samho Heavy Industries starting from Oct, with delivery set for first half of 2025. It is to be used for transporting 400,000 tons of North American shale gas, which will be made available domestically from 2026 to 2046. The company also plans to acquire more carriers in the future to secure a solid footing in the LNG industry.
SKorea's foreign reserves came to $420.98 bil, down $5.7 bil on-month, as of end May, as the dollar's ascent cut the conversion value of holdings in other currencies, according to Bank of Korea. Foreign securities, such as US Treasuries, had been valued at $378.96 bil, up $4.62 bil on-month, accounting for 90% of foreign reserves. The value of deposits stood at $17.82 bil in May, down $10 bil on-month. SKorea ranked as world's ninth-largest holder of foreign reserves as of end April.
Bank of Korea kept its key interest rate unchanged at 3.5% on 25th, opting for a third consecutive freeze as inflation has been showing signs of easing off in Korea in recent months. With the latest rate freeze, Korea-US key rate gap remains at up to 1.75%. The market projects the US Federal Reserve will hold the rate at its rate-setting meeting in mid June, ending its aggressive monetary tightening cycle.
SKorea's consumer prices rose 3.3% on-year in May. Prices of utility services shot up 23.2% on-year, amid prolonged jitters in global energy supply amid Russia-Ukraine war. Prices of agricultural, fisheries and livestock products, on the other hand, decreased by 0.3%, due to stabilized costs of pork and beef products. Industrial product prices increased 1.8% on-year, led by higher costs for bread and children's clothes. Those of diesel and gasoline fell 24% and 16.5%. Core inflation rose 3.9% on-year in May.
SKorean shipbuilding industry continues to secure newbuilding orders at record-high prices, as environmental regulations and increasing cost of the yards' profit drivers are strengthening the bargaining power of Korean major shipyards. On 22nd, HMD won a contract to construct 5 x 1,300 teu containerships, total order value of KW414.5 bil ($315 mil). The high vessel price, around 2.5 times higher than average traditionally fueled feeder containership, is reportedly due to various eco-friendly components. These ships are propelled by methanol dual-fuel engine and assisted by wind propulsion system. Read more¡¦
HD KSOE¡¯s strategy to focus on high-valued ships seems to pay off, achieving 65.3% of its annual order target. HD KSOE secured a total of 79 vessels worth $10.28 bil as of 23rd, attaining 65.3% of its $15.74 bil annual order target. It appears to be a huge achievement since global NB order declined about 43.7% on-year from Jan to April. Read more¡¦
HD HHI is reportedly keen on utilizing two drydocks at Subic yard in the Philippines. The Presidential Communications Office of the Philippines has confirmed HD HHI's interest in the shipyard. The Subic yard, originally constructed by Hanjin HIC (now HJ Shipbuilding and Construction), was once world's fourth-largest shipyard and the largest in the Philippines. During the peak of shipbuilding industry, it provided employment for roughly 20,000 locals. Read more¡¦
As Hanwha Group's M&A was completed, DSME was renamed Hanwha Ocean, marking the beginning of a new area. According to industry sources, Hanwha Ocean's new CEO and its new management were appointed at DSME's shareholders' meeting held on 23rd. Kwon Hyuk-woong, president of Hanwha's support division, was named as new CEO of Hanwh Ocean. Hanwha Group has pledged to turn the shipbuilder into one of the most innovative firms by combining Hanwha's defense capabilities with its DSME¡¯s design and shipbuilding capabilities. Before the acquisition, DSME had the lowest performance among Korea's Big3. Read more¡¦
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