KOREA (SOUTH): Korea's major industries bracing for downturn in 2016

After a year of prolonged economic downturn and a major drop in exports in 2015, South Korea faces another grim outlook in 2016 as most of its major industries are forecast for sluggish growth.

Though Korea’s overall trade will slightly grow, its net export volume will increase by just 2.1 % in 2015, according to the Korea Institute for Industrial Economics & Trade.

The state-run Korea Development Bank expects a general recession of the domestic economy to continue into the new year as the country’s major businesses experience only a “mild recovery,” with “slight variances in performance by sector” in 2016.

After swinging to recovery in 2015 thanks to low oil prices, Korea’s petrochemicals and refining sectors are set to continue benefiting from improved margins in 2016.

Low oil prices drive down the price of naphtha, from which petrochemicals are made, curtailing production costs and driving up demand. This is how naphtha cracking companies retained profitability in 2015 despite a decline in total exports.

“The petrochemicals sector will post a similar or a slightly downward performance in 2016, as long as crude prices remain relatively stable,” said the Korea Petroleum Association. “Rubber sales will improve while synthetic resins will see continued high demand.”

The Korea International Trade Association predicts Korea’s petrochemical exports will likely decline by around 0.4 %, as countries such as China step up their production capabilities in 2016.

Source: Daily “The Korea Herald”, Seoul; 31 Dec 2015
(Syed Rashid Ali, Karachi, Pakistan)