SEOUL, April 15 (AJP) - South Korea's import prices jumped at the steepest pace in nearly three decades as the outbreak of a full-blown war in the Gulf triggered a sharp surge in energy prices and the U.S. dollar against the Korean won, but trade terms remained robust so far as export prices rose at a similar pace on strong global demand for refined fuels and memory chips.
According to preliminary export and import price data for March released by the Bank of Korea (BOK) on Wednesday, import prices in won terms soared 16.1 percent from the previous month, the steepest increase since a 17.8 percent jump in January 1998. From a year earlier, they rose 18.4 percent.
The primary catalyst for this surge was international oil prices. Dubai crude jumped 87.9 percent, rising from $68.40 per barrel in February to $128.52 in March, driven by actual supply disruptions amid escalating military tensions between the United States and Iran, combined with fears over a blockade of the Strait of Hormuz. During the same period, Brent crude and West Texas Intermediate (WTI) also breached the $100 and $90 levels, respectively.
The dollar rose 2.6 percent from the February average of 1,449.32 won to 1,486.64 won.
That translated into surges of 88.5 percent quarter on quarter and 76.9 percent year on year in crude import prices — levels not seen since records began in won terms in 1985. The gain of 83.8 percent on contract exchange rate term marked the biggest increase since a 98.3 percent jump in January 1974 during the first oil crisis.
Jet fuel import prices soared 67.1 percent quarter-on-quarter and 81.8 percent year-on-year. Import prices of raw materials jumped 40.2 percent from the previous month and 40.0 percent from a year earlier. Coal and petroleum product import prices rose 37.4 percent month-on-month and 31.3 percent year-on-year.
Export prices also rose 16.3 percent from the previous month in March, the biggest increase since 23.2 percent in 1998. Prices for coal and petroleum products surged 88.7 percent month-on-month, led by major fuels including diesel and jet fuel. Chemical product prices also turned upward, indicating that rising energy costs are spreading across intermediate goods.
Korean refiners, which supply about 4 percent of global jet fuel, benefited from wider margins, partly supported by prewar inventories.
The won weakened sharply following the outbreak of the war, delivering a double hit alongside rising oil prices. As won-denominated trade prices are directly affected by currency fluctuations, the higher exchange rate lifted import prices while also amplifying export price gains.
The rise in export prices also reflected continued strength in semiconductor pricing. Prices for computers, electronic and optical devices rose 12.7 percent month-on-month. However, while the first two months of the year were characterized by demand-driven growth centered on chips, the March surge increasingly reflects cost-push pressure from higher energy prices.
Trade terms remained solid for now. The net barter terms of trade index rose 22.8 percent year-on-year, while the income terms of trade index jumped 50.9 percent. The surplus largely reflects export prices for semiconductors and petroleum products rising faster than import prices. Market attention is now shifting to April data, as structural pressures from rising raw material and energy costs are expected to become more visible.
In a scenario where energy prices and the exchange rate rise simultaneously, higher import costs are likely to spill over into consumer inflation. This could increase the cost burden for corporations and weigh on economic growth.
If Middle East risks persist, there are concerns that energy price increases will become entrenched across production costs. The Hyundai Research Institute (HRI) projected that if oil prices remain above $100 per barrel throughout the year, South Korea’s economic growth rate would drop by at least 0.3 percentage points. French investment bank Natixis went further, cutting its growth forecast for South Korea from 1.8 percent to 1 percent — a reduction of 0.8 percentage points.
Copyright ⓒ Aju Press All rights reserved.