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KOREA REPORT - SEPTEMBER 2022.
TOP ISSUES.
SKorea
lifted pre-travel COVID-19 test requirement for inbound travelers from 3rd amid easing virus wave. A mandatory PCR test within the first 24
hours of entry into SKorea will remain in place. SKorea will completely lift requirement for COVID-19 PCR test for travelers
entering the country starting Oct 1st, health authorities said on 30th.
Inbound travelers will no longer have to take PCR test within a day of their
arrival.
President
Yoon Suk-yeol on 9th expressed condolences over the passing of Britain's Queen
Elizabeth II, saying, "Her kind heart and good
deed will remain in our memories." "Deepest condolences to the people
of the United Kingdom for the passing of Her Majesty Queen Elizabeth II. She
had a strong belief in the cause of human freedom and left great legacies of
dignity," Yoon said, adding it was an "honor" to have shared the
same era with her.
Typhoon Hinnamnor, 11th typhoon this year,
passed SKorea on 6th, leaving eleven people dead, and one missing, and
dealing severe damages to cities on the east coast. A
total of 89,743 homes suffered power outages, total of 8,328 houses and 3,085 commercial
buildings have been flooded, and total of 7,141 hectares of farmlands have been
damaged nationwide. Typhoon Hinnamnor was previously expected to be one of the
strongest typhoons that SKorea has ever embraced. In terms of atmospheric
pressure, Typhoon Hinnamnor ranked third at 955 hpa, following Typhoon Maemi¡¯s
955 hpa in 2003. President Yoon on 7th designated southeastern cities of Pohang
and Gyeongju as a special disaster zone. Yoon said the government will approve
emergency initial fund of KW50 bil ($36 mil) for recovery work.
NK¡¯s
Defense Ministry said that the country has never supplied weapons to Russia and denounced the US for spreading ¡°groundless¡± rumors, the
state-run Korean Central News Agency reported on 22nd. The military official
underlined that NK has never recognized the ¡°unlawful and atrocious UN Security
Council sanctions resolutions on the DPRK, which have been fabricated by the US
and its vassal forces.¡± Earlier this month, the White House and the US Defense
and State departments concurrently admitted that the US had indications of
Russia approaching NK to request supply weapons to resupply its force fighting
in Ukraine. At that time, US State Department deputy spokesperson Vedant Patel
said Russia¡¯s Defense Ministry was ¡°in the process of purchasing mil of rockets
and artillery shells from NK for use in Ukraine.¡± NK¡¯s Defense Ministry claimed
that the US¡¯ goal is to ¡°tarnish the image of the DPRK.¡±
OECD
on 26th lowered its outlook for SKorea's growth to 2.2% for 2023, citing uncertainties in the global economy. The estimate is
lower than Seoul government's forecast of 2.5% and Asian Development Bank's
outlook of 2.3%, but higher than 2.1% projected by Bank of Korea and the
International Monetary Fund. OECD revised down its 2023 forecast for world
economic growth from 2.8% to 2.2%. OECD
projected SKorea will post a 2.8% growth to rank 12th among members of Group of
20 for 2022 gross domestic product
growth, hinting that the nation will see weakened momentum for economic
growth. OECD predicted 4.1% growth in Australia, 3.6% in Argentina, 3.4% in
Canada, 3.4% in Italy, 3.4% in the UK and 3.2% in China. OECD expected that
Saudi Arabia will top the list with 9.9% growth, followed by India with 6.9%,
Turkey with 5.4%, Indonesia with 5.0% and Spain with 4.4%.
SKorea
posted trade deficits of $3.77 bil in Sept, staying in red for six months since
April, due to faster growth in import, caused by higher energy costs. Six consecutive months of deficits marked the first time in 25
years since 1997. Export added 2.8% on-year to $57.46 bil in Sept, while import
surged 18.6% on-year to $61.23 bil. Import increased at a faster pace than
export for 16th month, topping $60 bil for seven months in a row. Import of
three energy sources, including crude oil, natural gas and coal, came to $17.96
bil in Sept, up 81.2% on-year. Import of semiconductors and precision chemical
materials went up 19.8% and 51.8%. Read more¡¦
Combined
Sales of SKorea's top 500 firms have soared to KW 3,286 tril ($2.3 tril) in
2021, up 39% from a decade earlier, according to CEO Score on 28th,
with information technology and electronics sector taking up the biggest share
at 17.3%, up 3.4% from a decade earlier. Petrochemicals sector came next with
11.1%, trailed by auto and auto parts industry with 10.3%, insurers with 8.3%
and banks with 6.6%. Sales by top 10 corporations took up 26.1% of the
aggregate last year. Samsung Electronics (SEC) accounted for 8.5% of total
sales, trailed by Hyundai Motor with 3.6%, POSCO with 2.9% and LG Electronics
with 2.3%.
Posco
said on 7th it has suspended operations of its steel manufacturing plant, due to flooding caused by Typhoon Hinnamnor that passed by the peninsula
on 6th. It is the first time that operations at Pohang plant has come to a
complete standstill since its establishment in 1973. The suspension comes after
storms and heavy rains swept the region, causing power outage at key facilities
at the plant, including all three blast furnaces. It is estimated that Posco
would be losing out on at least KW50 bil ($36 mil) for each day that operations
are suspended. Read more¡¦
SKorea's
foreign reserves shrank at the fastest pace in 14 years to $416.77 bil as of
end Sept, down $19.66 bil on-month, as authorities unloaded dollars to
stall local currency's excessive slide against the greenback. Bank of Korea,
however, dismissed worries that the country's foreign reserves might not be
sufficient enough to defend the won down the road and brace for a financial
crisis. Foreign securities, such as US Treasuries, had been valued at $379.41
bil as of end Sept, down $15.53 bil on-month. It accounted for 91% of total
foreign reserves. SKorea was ranked world's eighth-largest holder of foreign
reserves as of end Aug.
SKorea¡¯s consumer price index rose 5.6%
on-year in Sept, down 0.1% on-month. Prices of petroleum products
jumped 16.6% on-year, prices of agricultural, livestock and fisheries goods
went up 6.2% on-year, vegetable prices soared 22.1% on-year and prices of
personal services increased 6.4% on-year. Core inflation rose 4.1% on-year and
prices of daily necessities, such as food, clothing and housing, jumped 6.5%
on-year.
With just one
quarter left this year, Korean Big 3 are almost finished with the race to reach
their order goal. The progress has been very smooth so far. For the first
nine months, Big 3 attained 80-120% of their order goals for 2022. By company,
KSOE achieved its yearly order goal of $17.44 bil. KSOE said on 19th that it
has won four LNG-powered containerships and four 50K product carriers. With the
latest deal, KSOE secured newbuilds of $20.35 bil so far this year, exceeding
annual target by 116.6%. SHI secured 37 new vessels worth $7.2 bil including 28
LNG carriers, and nine containerships, achieving 82% of its order target ($8.8
bil). DSME secured 36 vessels including 30 LNG carriers worth $8.6 bil,
attaining 97% of its order goal $8.9 bil. FnGuide expected that KSOE's
operating profit forecast for third quarter of 2022 will be KW80.9 bil, marking
a turnaround, since third quarter of 2021. SHI and DSME are also expected
to significantly reduce deficit after third quarter and reach foundation for
next year's turnaround.
Big 3 secured four
years of order cover, raising possibility of the return of a 'super cycle' in
shipbuilding industry. If ships are ordered now, they wouldn't be delivered
until after second half of 2026. As of end July, KSOE secured $47.33 bil (in
terms of deliveries, $37.81 bil in terms of revenue) in their orderbook. SHI's
order backlog is $29 bil, comprising 145 commercial vessels ($25.1 bil), five
drilling facilities ($2.8 bil), and one production facility ($1.1 bil). DSME
secured 135 vessels worth $29.08 bil in its orderbook. Number of merchant ships
are 109 (worth $18.49 bil) such as 37 containerships, 46 LNG carriers, 16
tankers and 10 LPG carriers.
On the strength of
their firm forward cover, Korean Big3 are actively cherry picking lucrative
orders. As for LNG carrier, Korean shipbuilding industry was awarded 83 of
111 newbuilds ordered for the first eight months of the year.
Hanwha
Group said on 26th it has signed a conditional memorandum of understanding with
DSME to acquire a controlling stake of 49.3% and
managerial control of the shipbuilder, which has been under state supervision
for 21 years. Under the memorandum, Hanwha¡¯s six affiliates will purchase
DSME¡¯s newly issued stocks worth KW2 tril ($1.39 bil). Hanwha Aerospace will
fund KW1 tril, Hanwha Systems with KW500 bil, Hanwha Impact Partners with KW400
bil and three affiliates of Hanwha Energy will fund KW100 bil to participate in
the rights offering. KDB currently holds 55.7% stake in the shipbuilder. Its
stock ownership will be reduced to 28.2% once Hanwha¡¯s stock acquisition is
completed. KDB plans to forge
formal agreement with Hanwha within this year and to complete transaction
within first half of next year. DSME has been in the sales
process since 2001. DSME was spun off from the shipbuilding division of Daewoo
Heavy Industries back in 1999, when Daewoo Group faced corporate restructuring
in the wake of an International Monetary Fund bailout. DSME was rehabilitated
in 2001 through a KW2.9 tril public fund injection.
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