Exporters Face Three Hurdles

By Kim Tae-gyu Staff Reporter Local exporters are expected to face three major jitters this year ― the strong Korean currency, skyrocketing logistics costs and soaring values of raw materials, which are feared to weaken the price competitiveness of Korean made products. The most serious concern is the appreciating won, which has gained upside of 5 percent against the dollar during the past month as the greenback has lost value against other key currencies. The won-dollar exchange rate reached as high as 1,190 won per dollar on Dec. 18, 2009 but it now fluctuates in the neighborhood of 1,120. The rate is expected to drop further down the road. "The market consensus is that the won-dollar rate will head downward for the time being to about 1,050 won. Some even project that the rate might fall below the 1,000 won milestone," Standard Chartered First Bank chief economist Oh Suk-tae said. "If the government doesn't intervene in the market in a full-fledged manner, the trend won't stop in the near future. The strong won would undercut the profitability of our exporters." The second burden is the rising shipping costs. Carriers going to the United States raised oil surcharges by $70 this month, as well as levying $320 and $400 additionally for 20-feet and 40-feet containers for unscheduled outbound shipments. The fares to Europe were also raised by double digit rates this month. "The rising shipping costs are bad news for Korea Inc. at a time when the won-dollar exchange continues to drop," said Lee Sun-yup, an economist at Shinhan Investment Corp. "In particular, exporters of heavy products, including automobiles and steel, will be more vulnerable to the higher logistics costs. Our corporations in such segments will be negatively affected." Finally, the elevating values of raw materials undermine the bottom lines of domestic companies, which by and large depend on the processing trades. The non-ferrous metal prices traded at the London Metal Exchange climbed almost 10 percent during the past month spearheaded by strong values of such materials as aluminum or copper. Crude oil prices also exceeded the $80 per barrel plateau this month for the first time in 15 months. "We think that we will be able to chalk up surpluses this year if the won-dollar exchange rate moves in the vicinity of 1,050 won," said a CEO at a local car component maker. "Should raw material prices keep going up, however, we will suffer deficits this year. We are currently scrambling." Asia's fourth-largest economy racked up a record $41.2 billion trade surplus last year thanks to the weak won, which approached the 1,600 won level early last March, as well as favorable crude oil and raw material prices. However, the surplus is expected to decrease substantially this year because of the three hurdles. voc200@koreatimes.co.kr