South Korean export-driven companies faced difficulties in sustaining export margins above zero as the Korean won is continuously appreciating against the US dollar with the won eventually touching below the 1,100 won mark per dollar on October 25. Notably, the nation’s major industries including the household electronic, petrochemical and semiconductor industries are likely to suffer huge losses as the won-dollar exchange rate fell below the lowest possible rate to avoid negative export margins.
The nation’s export companies consider the exchange rate of 1,086.2 won per dollar as the lowest line, according to the analysis carried out by the Korea Chamber of Commerce and Industry (KCCI). At present, huge losses on exporters seem unavoidable with the won-dollar exchange rate standing at 1,085.4 won as of November 7
More specifically, household electronics (1,106.5 won), petro chemistry (1,104.3 won), semi conductors, display panels (1,099.0 won), food and beverages (1,090.4 won) all saw their lowest possible rates well above the current exchange rate, meaning that the more they engage in exports, the more severe losses they would face. Autos (1,084.9 won), steel and metal products (1,084.2 won), ships, plants, equipments (1,083.3 won) are particularly at greater risks of suffering losses.
“Household appliances, semiconductors, autos, ships which are easily swayed by the fall in the won-dollar rate take up a whopping 40 percent of the nation’s total exports,” noted the KCCI. “Companies involved in those industries will pose a grave risk to the nation’s economy amid stagnating domestic consumption.”
By size of the company, the lowest possible rate to stay profitable for large companies was 1,076.1 won on average while that for small and medium-sized businesses (SMBs) 1,090.4 won, indicating that SMBs will likely suffer greater losses from the rise in the won value as they are susceptible to the fluctuation of the won-dollar exchange rate.
[Written by Ikho-Choi - Jieun Lee/ edited by Soyoung Chung]
[ⓒ Maeil Business Newspaper & mk.co.kr, All rights reserved]