Boston, MA -- (SBWIRE) -- 11/13/2012 -- South Korea's trade performance took a hit going into the second half of 2012, with the country's freight industry badly positioned as a result. Exports collapsed 8.8% year-on-year (y-o-y) in July while imports saw a slippage of 5.5%, adhering firmly to the broader downward trajectory. Following the consolidation in export activity that began in early 2011, we are now likely to witness a protracted period of contraction in export performance as the global economy continues to weaken going forward. South Korea's main ports of Busan and Ulsan will both be adversely affected by a slump in external demand and, therefore, both will see less throughput this year compared to recent times.
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The double-digit tonnage throughput growth achieved at these two ports in 2010 is set to be a thing of the past, although the Port of Ulsan will reverse last year's tonnage growth contraction. We see the Port of Busan bouncing back to record stronger growth in 2013 and beyond, while the Port of Ulsan will continue to post y-o-y growth that comes in between the 4-5% mark.
As we have warned since the beginning of the year, the dual factors of overcapacity and declining volumes are both going to be looming threats on a global scale during 2012, with South Korea no different in this respect. Rates are set to be forced down due to the slower economic growth occurring in the country's key demand markets of the US and eurozone, and carriers will once again face the prospect of further losses. A predicted slowdown in China, Seoul's main export partner by far, will also have a detrimental impact on South Korea's shipping industry in the short term. While a recession in China is off the radar of most observers, the evidence that the economy is close to contraction is compelling, and leading indicators suggest that the worst is not over yet, providing some ominous clouds on South Korea's horizon.
Headline Industry Data
- 2012 tonnage throughput at the Port of Busan forecast to increase by 4.12%.
- 2012 tonnage throughput at the Port of Incheon forecast to grow by 5.12%.
- Container throughput at the Port of Busan is set to rise by 3.70% in 2012, while the Port of Incheon is predicted to see a 4.21% increase.
- The total value of South Korea's trade (imports plus exports) is set to enjoy real growth of 2.50% in 2012.
Key Industry Trends
Tight Market Creates Boom Times For Rig Sector
The twin factors of persistently high oil prices and new technologies have sparked a flurry of new exploration and production (E&P) activity. At the forefront of these developments, and prime beneficiaries, are the auxiliary services, from oilfield services to specialised shipbuilders and engineering companies. Hyundai Heavy Industries' latest orders, grossing a total of US$600mn, come hot on the heels of other large developments, suggesting a boom is occurring in the offshore ship construction sector.
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