Canada Wood Today | The Canada Wood Group

Korea Economy, Housing and Lumber Shipments

Tai Jeong

By Tai Jeong

Country Director, Canada Wood Korea

February 28, 2013

Economy Update

The global economy shows some signs of improvement, but downside risks to growth at home and abroad still persist for the export-dependent Korean economy.  As exports and domestic demand remained weak amid the protracted eurozone debt crisis, the South Korea’s GDP grew only 0.4% in the fourth quarter period of 2012, quickening from a 0.1% on-quarter gain tallied in the third quarter.

Exports declined 1.2% on-quarter in the fourth quarter, after growing 2.8% in the previous quarter. Overseas shipments grew 3.7% in 2012, the weakest gain in three years.

Private spending rose 0.8% in the fourth quarter, picking up from 0.7% growth in the third quarter.

Facility investment contracted 2.8% after falling 4.8% three months earlier, and construction investment declined 1.3%, worsening from a 0.1% gain in the previous quarter.  Jobless rate stood at 2.9% in December, slightly up from the previous month’s 2.8%.

The local currency is on the ascending trend per the US dollar and the Japanese yen, driven by powerful credit easing by advanced economies, raising concerns that exports could be crimped. The dollar closed at 1,046.03 won on January 24, 2012, down 4.24 % from 1,092.29 the same date in 2011 and down 1.23% from 1,059.02 one month earlier.

 

Housing Construction

Korean Housing Starts Summary and Market Condition:

Showing a 6.2% decrease in November housing starts, Korea’s housing starts in the first 11 months of 2012 slightly increased 0.7% to 81,843 buildings from a year earlier 81,284 buildings.

Domestic construction industry, especially mid- and small-sized builders, has been squeezed by a liquidity crunch since the global economic downturn in 2008. Market watchers forecast the number of bankruptcies to increase this year, as about 65% of small and medium-sized builders have to reschedule their debt payment within this year.

The number of South Korean builders continues a decline since 2006 due to a market slump and industry restructuring. The number of the nation’s general contractors stood at 11,304 as of the end of 2012, down 2.1% from a year earlier, according to the data released by the Construction Association of Korea.

With the grim outlook for the domestic real estate market in 2013, Korean construction industry urged the government to draw practical measures to support small and medium-sized builders and the incoming government of President-elect Park Geun-hye is widely expected to take stimulus measures to boost up the construction and real estate industry in the face of lingering economic uncertainty at home and abroad.

Korean Wood Building Permits and Starts Summary:

The number of wood building permits and wood building starts for the 11 months in 2012 increased 4.7% to 11,020 and 4.0% to 9,759 respectively compared with the same period in 2011.

Wood Building

2008

2009

2010

2011

Jan.-Nov.

Jan.-Nov.

(%)

2011 YTD

2012 YTD

Number of Permits

10,184

11,022

10,922

11,382

10,523

11,020

4.7

Number of Starts

8,191

9,503

9,558

10,159

9,388

9,759

4.0

Source: Ministry of Land, Transportation and Maritime Affairs (as a percent compared to previous year same month and period)

SPF Shipments

 

Canadian SPF exports to South Korea in the first 11 months of 2012 considerably increased 7.2% to 122,638 MFBM while export dollar value increased 13.7% to CDN $57.2 million compared to the same period in 2011.

As predicted, November shipment significantly decreased 42% compare to the same month in 2011. The industry estimated that the weakened shipment of SPF in November would attribute to the current treated wood issue in Korea and higher lumber price caused by the higher lumber demand from the US housing sector.

The improved housing market in the US during the past four months has resulted in both higher lumber production in North America and in increased importation of lumber from the US. As a consequence lumber prices have gone up by over 30% from last year.