
Korean industries are expressing growing concern with the burden of increased raw material import costs and overseas investment expenses outweighing potential export benefits amid high exchange rates. (Image courtesy of Yonhap)
SEOUL, Jan. 21 (Korea Bizwire) — Korean industries are expressing growing concern with the burden of increased raw material import costs and overseas investment expenses outweighing potential export benefits amid high exchange rates, according to a new report released on January 20.
The Korea Chamber of Commerce and Industry surveyed 12 major industry associations to assess the impact of high exchange rates, depicting the results as a weather forecast. The outlook appears “cloudy” for biotech, semiconductors, batteries, steel, petrochemicals, oil refining, displays, textile fashion, and food industries, while shipbuilding, automotive, and machinery sectors forecast “mostly clear” conditions.
The pharmaceutical and biotech sector faces significant cost pressures due to heavy reliance on imported drug ingredients and overseas clinical trials. The Korea Bio Association noted that while biosimilar and contract manufacturing organizations benefit from exports, most domestic companies struggle with rising import costs and R&D expenses.
The steel, petrochemical, and oil refining industries face deteriorating profitability amid already challenging market conditions. The Korea Iron & Steel Association reported limited exchange rate benefits due to weak industrial demand and price pressure from Chinese overproduction, combined with high raw material costs.
The semiconductor, battery, and display industries expressed concerns about manufacturing costs and increased overseas investment expenses. The Korea Semiconductor Industry Association pointed out that while higher exchange rates boost short-term sales, the industry’s 30% localization rate for materials and equipment means increased production costs, while major investments in overseas manufacturing facilities offset potential gains.
The shipbuilding, automotive, and machinery sectors show more positive outlooks due to their high export orientation. However, industry representatives cautioned that prolonged high exchange rates could lead to increased costs and reduced demand.
Lee Jong-myung, head of industrial innovation at the Chamber of Commerce, emphasized the need for both corporate efforts and government support, suggesting expanded currency swap lines with major countries like the United States and emergency financial support for affected industries to protect the Korean economy from exchange rate volatility.
The textile and fashion industry, dominated by small businesses with fewer than 10 employees, appears particularly vulnerable. The Korea Federation of Textile Industries warned that small and medium-sized companies with high import dependencies could face greater production difficulties if high exchange rates persist.
The food industry, which imports 68.2% of its raw materials including wheat, soybeans, corn, and raw sugar, called for temporary tariff reductions on major food ingredients to alleviate cost pressures.
M. H. Lee (mhlee@koreabizwire.com)