The full Korean Times trainwreck news item. Notice last paragraph on strong exchange rates. Key to surviving this:
Korean Times
By Kim Tae-gyu
Staff Reporter
Skyrocketing raw material prices may pose a serious
threat to the economy combined with scarcity of
industrial resources, market analysts cautioned on
Sunday.
They said domestic brick-and-mortar firms had a hard
time in procuring raw materials and predicted an
industry-wide crisis in the coming months due to the
price hike.
Medium- and small-sized companies, which are
vulnerable to external shock, are expected to be the
first victims of the anticipated crisis, as many of
them are likely to stop operation should the
high-flying price trend continue.
Even more damaging are predictions the soaring input
costs will trigger price hikes for other products
across the industry, which will dent the economy¡¯s
fragile recovery.
``The hikes in material prices might delay the
economic recovery by raising overall price levels and
thus reduce Korea¡¯s overall purchasing power _ a
vicious cycle which will weigh heavy on the
economy,¡¯¡¯ experts said.
They stressed the government should step in and come
up with proper measures to prevent such circumstances
from threatening the health of the economy.
Catching Up With Rising Prices
The Reuters Commodity Index, which combines prices of
17 mineral and non-iron metals, started its rally from
June, 2003 at 1,416.9 and finished last month at
1,671.1.
Local electrolytic copper providers have struggled to
secure their basic materials as China ate up the
scrap. The price of electrolytic copper also rose to
$2,389 per ton last month from $1,647 in October 2003.
During the same period, aluminum prices ran up from
$1,474 per ton to $1,610, leading the upward trend of
prices for non-iron metals, including nickel and zinc.
In the case of raw steel materials like scrap and
billet, their prices are outstripping even those of
steel. Billet was traded at $295 per ton in last
year¡¯s third quarter but its price is hovering at the
$420 level of late.
Petrochemical resources also joined the price
inflation, as ethylene tacked on $118 per ton to $725
from last December and benzene is selling at $570 per
ton from $527 late last year.
However, domestic outfits have struggled to ditch ways
to buffer the negative repercussions of the
ever-rising raw material prices, as shown in the
confrontation between steel and construction
industries.
To avoid heavy losses, domestic steel makers recently
raised the price of steel products, but construction
companies have vowed to throw their weight to nullify
the measures.
Government Measures to Straighten Things Up
To tide over the raw material problems, the government
has rolled up their sleeves, but the ongoing crisis
shows no signs of letting up.
The Ministry of Commerce, Industry and Energy has
tried to come up with proper countermeasures against
the rising raw material prices.
It lowered tariffs on some import items like nickel
bar and alumimium bar as well as reducing tariffs
further on items imported by medium- and small-sized
companies.
Also included in the package is a provision for two
investigation teams, aimed at settling the shortage of
steel scrap as well as monitoring monopoly of them.
However, experts cast doubts on the effect of such
policies, saying the measures are not appropriate for
grappling with the lack of raw materials in light of
the real culprit of the crisis.
``The current raw material crisis was caused by China,
as the country ate up all the materials to channel
into their overlapping investment,¡¯¡¯ Kim Kyong-won,
a researcher at the Samsung Economic Research
Institute, said.
Portraying the Asian giant as the ``black hole of
raw materials, Kim recommended the alternative policy
to cushion the impact of the crisis.
He recommended to revise the government¡¯s strategy of
keeping foreign exchange rates high, thus reducing the
procurement costs of manufacturers. |
