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South Korea Economy, Construction & Lumber Shipments

Economic Update, Housing Construction & Lumber Shipments

Tai Jeong

By Tai Jeong

Technical Director, Canada Wood Korea

September 29, 2016

Economic Update

WFC Ocean Park_00014South Korea’s GDP per capita reached US$27,214 in 2015 and is expected to touch the landmark US$30,000 level (be more specific, US$31,744) in 2018 contingent upon some economic conditions including annual GDP growth of 2.8% for 2017 and 2.9% for 2018.

South Korea extended its trade surplus streak to 55 consecutive months in August on the back of a turnaround in exports for the first time in 20 months.  Exports rose 2.6% to US$40.1 billion in August from a year ago to snap a 19-consecutive-month losing streak that started in January 2015 and imports at the same time also turned around to edge up 0.7% to US$35 billion marking the first on-year growth in 23 months resulting trade surplus came to US$5.1 billion in August.

South Korea’s consumer prices increased 0.4% in August, the slowest pace in 16 months from a year earlier rekindling concerns of possible deflation saddled with a protracted slump in domestic demand and falling exports.  Country’s unemployment rate edged up to 3.6% in August, compared with 3.5% tallied in July.  The monthly gain in employment was majorly led by the construction sector on the back of a fresh boom in the real estate market.

The exchange rate for Canadian Dollar averaged at 855.24 won in August, 2016, down by 4.63% from 896.80 in August, 2015 and down by 2.59 % from 877.97 in one month earlier.

Housing Construction

WFC Anderson Walk_00025South Korea’s housing starts in year-to-date July of 2016 increased 5.2% to 68,242 buildings from a year earlier 64,892 buildings.  Housing permits in the same period also increased 10.1% to 77,705 buildings from a year earlier 70,563 buildings, amid the South Korean government’s continuous efforts to prop up the local real estate market.

The number of wood building permits and wood building starts in year-to-date July of 2016 also increased 12.0% to 9,924 buildings and 11.7% to 8,733 buildings respectively compared with those in 2015. The noticeable things are both total floor areas of wood building permits and starts in the same period of 2016 remarkably increased to 16.5% and 16.1% to 875,861 m2 and 784,317 m2 respectively from a year earlier.

South Korea’s home transactions gained 4.3% from a year earlier in August amid growing concerns over mounting household debt.Home transactions in Seoul and its surrounding areas continued to increase leading the overall transaction cases, gaining 13.8% to 57,000 from the same month last year while numbers for provincial regions fell 6.5% to 41,000.

By type, transactions involving apartment units rose 3.3% on-year and those for row houses jumped 12.2%, while those involving detached houses retreated 0.9%.

Lumber Shipments

WFC Anderson Walk_00010Very low production costs in Eastern Russia coupled with the sharp depreciation of the Russian Ruble have resulted in major 27% increase of Russian sawn lumber shipment to South Korea for the first seven months of 2016 causing negative impact on structural lumber exports from Canada to South Korea.  Albeit small amount compared with Canadian lumber shipments to South Korea, lumber shipments from Finland have shown a significant 86.2% increase during the same period owing to more competitive prices for lumber from Northern Europe benefited by the weaker currencies in Nordic countries.

Consequently, BC softwood lumber export volume to South Korea for the first seven months of 2016 decreased 14% to 161,545 cubic meters as compared to 187,902 cubic meters for the same period of 2015.

Export value for the same period of 2016 also decreased substantially 13% to CAD$43.610 million as compared to CAD$50.144 million in 2015.

For the year-to-date to July of 2016, BC’s SPF shipment to South Korea decreased 12.9% to 155,456 cubic meters while shipments of Hemlock, Western Red Cedar and Douglas-Fir plunged 31.1%, 53.4% and 84.8% to 4,062 m3, 684 m3 and 252 m3, respectively.