South Korea's export prices fall 3.7% in August, hitting lowest in nearly 4 years on weaker won

South Korea's export prices fell at their steepest pace in three years and eight months in August, as a weaker won more than offset a rise in global oil prices. Import prices also declined for a third consecutive month.

According to the Bank of Korea's provisional August export and import price index and trade index released Tuesday, import prices in won terms fell 2.4 percent from the previous month — extending a decline that began in June, when they dropped 4.2 percent. Compared with a year earlier, import prices were up 15.6 percent.

"Although international oil prices rose, the won's depreciation pushed down prices of chemical products and primary metal products, resulting in a 2.4 percent month-on-month decline," said Lee Heung-hu, head of the Bank of Korea's price statistics team.

The monthly average price of Dubai crude oil rose 15.6 percent in August to $88.8 per barrel, up from $76.8 the previous month. Over the same period, the won-dollar exchange rate fell 6.1 percent, from 1,497.4 won to 1,406.3 won per dollar.

Breaking down import prices by end use, raw materials rose 1.5 percent month-on-month, led by a 2.1 percent gain in mining products as crude oil prices climbed 6.8 percent. Intermediate goods fell 4 percent, dragged down by chemical products — including lithium hydroxide, down 9.1 percent, and chemical additives, down 5.7 percent — and primary metal products such as refined aluminum, which fell 4.1 percent. Capital goods and consumer goods declined 4.2 percent and 4.4 percent, respectively.

Looking ahead to September, Lee said the exchange rate had fallen 3.7 percent through Friday while international oil prices had surged 23.8 percent as conflict in the Middle East resumed. "Both upward and downward factors — including the exchange rate and global oil prices — are mixed," he said. On a year-on-year basis, he forecast that the sharp widening of the oil price increase would sustain double-digit gains in September as well.

The export price index fell 3.7 percent from the previous month, its lowest reading since December 2022, when it dropped 6.1 percent. While coal and petroleum products rose on higher global oil prices, most other categories declined due to the weaker won. Year-on-year, export prices rose 42.4 percent, extending a streak of gains to 12 consecutive months.

By category, manufactured goods fell 3.7 percent month-on-month. Coal and petroleum products edged up 0.3 percent — with diesel up 2.8 percent and jet fuel up 2.4 percent — but chemical products fell 5.3 percent, dragged down by cosmetics, down 6.1 percent, and polyethylene resin, down 4.2 percent. Semiconductor-related items also declined, with DRAM falling 3.4 percent and computer memory devices down 1.9 percent. Lee said a weaker won can reduce the won-denominated value of chipmakers' earnings, but added that underlying semiconductor export prices, stripped of the currency effect, continue to trend solidly higher. "From the perspective of the overall economy, corporate profits may shrink on the export side, but importers and consumers may benefit, so a comprehensive view is needed," he said.

Agricultural, forestry and fishery products fell 2 percent, with frozen seafood down 2.6 percent.

Turning to trade volume data, the export volume index rose 25.9 percent year-on-year in August, driven by gains in computers, electronics and optical instruments as well as chemical products — a 10th consecutive month of increases. The export value index climbed 75.8 percent over the same period.

The import volume index rose 12 percent, boosted by computers, electronics and optical instruments as well as machinery and equipment. The import value index gained 23.1 percent.

The net barter terms of trade index — which measures how many units of imports one unit of exports can buy — rose 27.1 percent year-on-year in August, as export prices climbed 39.6 percent while import prices rose 9.9 percent. The reading surpassed the previous all-time high set in July, when the index gained 24.7 percent, setting a new record within a month. Lee attributed the improvement to a widening in semiconductor-led export price gains, while import price increases — led by mining products — held steady at the prior month's pace.

The income terms of trade index — which measures the volume of imports that total export revenues can purchase — surged 60 percent year-on-year, as both the net barter terms of trade index, up 27.1 percent, and the export volume index, up 25.9 percent, advanced together. That marks the largest increase since the statistics were first compiled in 1988.