Canada Wood Today | The Canada Wood Group

Korea Economy, Housing & Lumber Shipments

Tai Jeong

By Tai Jeong

Technical Director, Canada Wood Korea

October 2, 2013

Economic Update:

South Korea’s economic size has ranked 15th globally in 2012, remaining at the same spot for five years since 2008. South Korea’s nominal GDP grew 2% in 2012 to US$ 1.13 trillion up from US$1.11 trillion in the previous year, the slowest growth in three years as exports and domestic demand remained weak amid the global slowdown, but is widely expected to grow around 2.7 ~ 2.8% in 2013.

South Korea is differentiating itself from troubled emerging markets including India and Indonesia sparked by a possible tapering of U.S. monetary stimulus as its economic fundamentals remained sound on the current account surplus run and the accumulation of foreign exchange reserves.

The on-year GDP growth reached 2.3% in the second quarter of 2013, marked the fastest quarterly growth in over two years, cementing the market’s view that Asia’s fourth-largest economy is on a modest recovery track, aided by fiscal and monetary stimulus.

South Korea’s exports, which account for about 50% of the economy, grew 1.8% in the second quarter of 2013. The growth in exports resulted in widened trade surplus from a year earlier posting its August trade surplus to US$4.91 billion, up from US$2.75 billion in August 2012.

Private and government spending rose 0.7% and 2.4% respectively on-quarter in the second quarter of 2013. Facility investment declined 0.2% on-quarter and construction investment grew 3.4% on-quarter in the second quarter of 2013.

The GNI(gross national income), a gauge of the population’s purchasing power, rose 2.9% on-quarter in the second quarter of 2013, the fastest growth since a 4.8% on-quarter gain in the second quarter of 2009.

South Korea’s consumer price growth stayed in the 1-percent range for the 10th straight month in August. The country’s consumer price index rose 1.3% on-year in August, decelerating from a 1.4% gain tallied in the previous month.

South Korea’s jobless rate stood at 3% in August, down from 3.1% in July. Job creation is picking up speed showing some signs of rebounding from its prolonged slumping growth trend.

The US dollar keeps falling against the Korean currency (won) as foreign investors continue their buying of Korean stocks. Market experts predict the won’s steep appreciation would continue for the time being since the US Federal Reserve decided to delay the tapering of monetary stimulus and the won’s value against the US dollar is predicted by experts to stand at 1072.5 won on average at the end of 2013. The government and local exporters are busy looking for a countermeasure.

The Canadian dollar closed at 1,042.09 won on September 26, 2013, decreased 8.63 % from 1,140.53 the same date in 2012 and down 1.50 % from 1,057.91 one month earlier.

Housing Construction

Korea’s housing starts in the first seven months of 2013 decreased 9.0% to 49,803buildings from a year earlier 54,742 buildings.

The number of wood building permits and wood building starts for the first seven months in 2013 also decreased 7.9% to 6,782 and 5.7% to 6,073 respectively compared with the same period in 2012.

Wood Building

2008

2009

2010

2011

Jan.-July

Jan.-July

(%)

2012 YTD

2013 YTD

Number of Permits

10,184

11,022

10,922

11,382

7,365

6,782

-7.9

Number of Starts

8,191

9,503

9,558

10,159

6,440

6,073

-5.7

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

Prices of South Korea’s apartment houses have rebounded and home builders are rushing to provide new houses after the government’s steps to support the property market on August 28.

After providing 7,000 new houses late July, home builders plan to pour over 64,000 new houses into the market until October, which is up by 1.7 time from a year ago.

According to local property market information, more people are seeking to buy and sell house after the August 28 measures, with prices rebounding in Seoul and its vicinity. Part of demand for jeonse houses also turns into purchasing.

Lumber Shipments

BC softwood lumber export volume to South Korea for the first seven months of 2013 significantly decreased 22% to 160,397 cubic meters as compared to 206,262 cubic meters over the same period in 2012 widely affected by overall domestic housing market slump and treated wood issue in Korea and losing price competiveness due to increased Canadian lumber prices. However, increased Canadian lumber prices compensated the decreased export volume gap showing a 0.94% increase in export value to CAD$40.63 million as compared to CAD$40.25 million over the same period in 2012.

Although shipment volumes to Korea from European countries are still relatively small, European lumber volumes shipped to Korean wood market were more than three times higher this year than in the same period in 2012. January-August accumulative shipment from Austria was increased 357%, Germany 274% and Finland 45% compared with the same period in 2012. And the demand for wood products from these European countries is expected to go up in the coming years.

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