South Korea’s exports climbed at the fastest pace in more than two years in December, buoyed by a pickup in global demand as vaccines raised hopes for a recovery. The value of overseas shipments increased 12.6% from a year earlier in December, the Ministry of Trade, Industry and Energy said on Friday, compared with the median estimate for a 6.3% increase in a Bloomberg survey of economists. Exports to China rose 3.3% while total semiconductor shipments increased 30%, the biggest jump since August 2018. The rise in Korean exports underscores resilient demand despite a worsening global pandemic. With vaccinations kicking off in some countries, optimism is growing that global commerce will keep improving. Trade will likely remain the pillar of South Korea’s growth at the start of 2021, as a surge in local virus cases depresses consumer activity.
Insights
Korea’s trade data serve as a timely indicator of the global economy’s health as its companies are deeply embedded in supply chains. The government expects exports to rise 8.6% in 2021 as the world economy gradually recovers from the pandemic. Among the risks to the outlook is a coronavirus variant that is forcing some countries to ban foreign visitors. A strong won also undercuts earnings at Korean manufacturers that rely heavily on overseas sales, such as Samsung Electronics Co. and Hyundai Motor Co. Smartphones have been one of the export products to rebound at the fastest pace in the fourth quarter, reflecting greater consumer appetite for mobile products. Displays, including state-of-the-art organic light-emitting diodes, have also seen increased demand, with sales of mobile gadgets that use them rising. Prices of semiconductors, Korea’s biggest cash cow, remain largely stagnant even as volumes of shipments increase. Profitability for chips will hinge on the pace of inventories drying up at major tech companies and the extent of an increase in global demand for smartphones.
South Korea’s average daily shipments, which account for the difference in the number of working days, rose 7.9% in December. There was one more business day in December 2020 compared with the same month in 2019. Display shipments increased 28% in December from a year earlier, while exports of wireless communication devices rose 39.8%. Overall exports to the U.S. rose 11.6%, while those to Japan increased 1.4% and shipments to the European Union climbed 26.4%. Overall imports rose 1.8% from a year earlier, resulting in a trade surplus of $6.94 billion.