South Korea Economy, Construction & Lumber Shipments
With hopes for an economic recovery are rising in South Korea, the Central Bank of Korea revised South Korea’s economic growth forecast in 2017 inched up to 2.6% from its previous January projection of 2.5% and facility investment to a 6.3% growth from a 2.3% contraction last year.
Amid eased political risks following the arrest of former President Park and the fixed schedule for the presidential election on May 9th, consumer sentiment and facility investment have somewhat improved with a recent upturn in exports and production and a light rebound in private consumption. However the recovery of exports could be restricted by the diplomatic row with China over South Korea’s deployment of a US anti-missile defense system (Terminal High Altitude Area Defense: THAAD) and rising security tensions with North Korea.
South Korea’s exports rose 13.7% to US$48.9 billion in March from a year earlier, the largest gain since December 2014 and an increase for the 5th consecutive month. Imports soared 26.9% on-year to $42.3 billion in March resulting US$6.6 billion, a 62 straight months of a surplus.
Consumer prices increased 2.2% in March, the fastest hike in nearly five years on a sharp rise in gas prices. Unemployment rate stood at 4.2% in March, edging down 0.1% point form the same month last year and down 0.8% point from a month earlier.
The exchange rate for Canadian dollar averaged at 847.85 won in March, 2017, slightly down by 5.62% from 898.37 in March, 2016 and also down by 3.00 % from 874.09 in one month earlier.
The won rose against the US dollar in March due to increased exports and inflows of foreign capital into local stock markets and finished the month at 1,118.40 against the greenback, compared to 1,130.7 a month earlier.
South Korea’s housing starts in number of buildings for the first two months of 2017 increased 13.5% to 14,364 buildings from a year earlier 12,654 buildings while that in number of units decreased 0.7% to 62,823 units from a year earlier 63,267 units.
Housing permits in number of buildings for the same period of 2017 also increased 6.6% to 16,634 buildings from a year earlier 15,610 buildings while that in number of units significantly decreased 11.6% to 89,480 units from a year earlier 101,259 units amid ongoing government intervention to limit the supply of new homes, especially new apartments in Seoul, as a way of limiting the rise in household debts.
While the residential construction sector struggles, the number of wood building permits and wood building starts for the first two months of 2017 increased 2.2 % to 2,186 buildings and 14.7% to 1,931 buildings respectively from a year earlier. Both total floor areas of wood building permits and starts for the same period in 2017 increased remarkably to 15.5% and 20% to 219,070m2 and 180,053 m2 respectively from a year earlier.
According to the data compiled by Kookmin Bank, the largest domestic customer base bank, the average sales price of apartments in Seoul has surpassed the 600 million won (US$537,000) mark for the first time, due to reconstruction projects in the affluent Gangnam Ward in the southern part of the capital city. A typical house for South Koreans is an 82~109 m2 apartment and the price hike is driven by large-scale redevelopment projects to tear down old apartment buildings in Gangnam Ward and build new ones. In comparison, the average sales price of apartments across the country came to 319 million won (US$285,505).
Export value for the same period also decreased 20.6% to CAD$10.489 million as compared to CAD$13.216 million for the same period in 2016.
According to the data from Korea Forest Service, Chile ranked as the number one lumber export country for the first two months of 2017 with a 48.2% increase to 104,020 m3 followed by Russia with a 16.3% decrease to 64,040 m3 and Canada.
Germany ranked as the 4th largest lumber export country with a remarkable 99.5% increase to 22,560 m3 followed by Finland with a 48.5% increase to 13,780 m3 and Austria with a 81.5% increase to 12,580 m3.
Historically low levels of lmber prices in European countries and devalued ruble and very low production costs coupled with major capital investments into logging, sawmilling, value-added processing and logistics in Russia, both European and Russian mills contiune to gain lumber market share in South Korea, especially as they increase their volume of kiln-dried and higher-grade lumber. These factors pose a growing threat to Canadian lumber export to South Korea.