Canada Wood Today | The Canada Wood Group

Korea Economy, Construction & Lumber Shipments

Tai Jeong

By Tai Jeong

Technical Director, Canada Wood Korea

May 5, 2015

Economy

The South Korean government has recently announced plans to add a further 15 berths to Busan New Port, increasing container capacity by 15m teu.

The South Korean government has recently announced plans to add a further 15 berths to Busan New Port, increasing container capacity by 15m teu.

The South Korean economy expanded 3.3% in 2014 as increased facility investments offset slowing growth in construction investment and exports.Facility investment increased 5.8% in 2014, turning around from a 0.8% on-year contraction in 2013. Construction investment growth, however, sharply slowed to 1% from a 5.5% growth in the previous year.

Private spending came in at 1.8%, remaining mostly unchanged from a 1.9% on-year gain in the previous year. Their per capita gross national income, a gauge of the population’s purchasing power, reached US$28,180, up $2,001 from 2013.Exports rose 2.8%, slowing from a 4.3% increase in 2013, while growth in imports quickened to 2.1% from 1.7%.

South Korea’s gross domestic product grew 0.8% in the 1st quarter of 2015 from three months earlier on increased construction investment and improved spending. From a year earlier, the economy expanded 2.4% in the first quarter.Consumer spending increased 0.6% from three months earlier, slightly quickening from a 0.5% rise in the fourth quarter. Government spending growth stayed on par at 0.2%.

Growth in construction investment sharply gained 7.5% on an increase in residential building projects. South Korea posted a trade surplus for the 38th month in a row in March of 2015 by reaching US$8.4 billion, up from $7.8 billion in February and $3.5 billion a year earlier as imports dropped at a faster click than exports. Consumer price index inched up 0.4% in March from a year earlier, the slowest pace in nearly 16 years signaling that the economy remains gripped by flaccid private consumption.

Jobless rate dropped to 4% in March from a month earlier due to seasonal factors and more hiring by the manufacturing and service sectors. Volatility in the won-dollar exchange rate hit a three-year high in the first quarter of 2015 as the foreign exchange market seesawed due to speculation over a possible U.S. interest rate hike.

The exchange rate for Canadian Dollar averaged at 882.70 won in March, 2015, dropped 8.42 % from 963.86 in March, 2014 and slightly up by 0.61% from 877.36 in one month earlier.

Housing Starts

Mounting household debt after three rounds of rate cuts in less than a year keeps policymakers wary while the recovering local housing market means borrowings could rise above the current level, putting South Korea's household debt-to-income ratio near the top among major economies.

Mounting household debt after three rounds of rate cuts in less than a year keeps policymakers wary while the recovering local housing market means borrowings could rise above the current level, putting South Korea’s household debt-to-income ratio near the top among major economies.

South Korea’s housing starts in year-to-date February of 2015 increased 6.5% to 10,389 buildings from a year earlier 9,759 buildings owing to the continuous government measures to revamp the country’s property market. Housing permits in the same period inched up 1.1% to 11,575 buildings from a year earlier 11,453 buildings.

The number of wood building permits and wood building starts in year-to-date February of 2015 remarkably increased 24.4% to 1,896 buildings and 13.2% to 1,345 buildings respectively compared with those in 2014.

Wood Building 2010 2011 2012 2013 2014 Jan.-Feb. Jan.- Feb. (%)
2014 YTD 2015 YTD
Number of Permits 10,922 11,686 11,826 11,710 13,062 1,502 1,869 24.4
Number of Starts 9,585 10,037 10,369 10,339 11,493 1,188 1,345 13.2

Source: Ministry of Land, Infrastructure and Transport (as a percent compared to previous year same month and period)

Overall, the South Korean real estate market conditions are continuing to show signs of improvement.Apartment prices in South Korea increased at a faster rate in the first quarter of 2015 compared with a year earlier reflecting growing demand for property purchase amid low interest rates. Prices of apartments in the Seoul area shot up 0.75%, with its pace nearly doubling from 0.39% a year ago. Overall, apartment prices in the metropolitan area jumped 0.95%, compared with 0.54%.

South Korea’s overall home transactions shrank slightly from a year earlier in February, 2015 while the number of home transactions in the capital region surged to a nine-year high.The number of home transactions came to 78,864, down 0.4% in February from the same month last year. However, home transactions in capital Seoul jumped 10.4% on-year to 12,990 in February last month with the number for the entire capital region, including Gyeonggi Province and the western port city of Incheon, growing 4.2% to 37,502.

By type, transactions of apartment units, the most common form of housing in South Korea, slipped 1.6% on-year to 57,885 in February, while transactions of row and detached houses gained 4.6% and 0.7%, respectively, to 11,999 and 8,980.

Lumber Shipments

In 2014, Canada concluded an agreement with the EU and implemented its FTA with South Korea, Canada’s first agreement with an Asian country, as well as putting into effect an investment protection agreement with China.

In 2014, Canada concluded an agreement with the EU and implemented its FTA with South Korea, Canada’s first agreement with an Asian country, as well as putting into effect an investment protection agreement with China.

BC softwood lumber export volume to South Korea for the first two months in 2015 dropped 15.5% to 31,610 cubic meters as compared to 37,418 cubic meters for the same period in 2014. The drop was largely attributed to the three-day traditional Lunar New Year’s Day break that fell in February this year, instead of January in 2014.

However, export value in year-to-date February continued to increase 2.6% to CAD$10.309 million as compared to CAD$10.047 million in the same period in 2014, owing to the strengthened Korean won against Canadian dollar.

Click on graph to enlarge.

korea-lumber-shipments