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  Korea Report - July 2018
  Author : Hwang & Co     Date : 18-08-05 13:04     Hit : 38939    
   Korea Report - July 2018.pdf (418.6K), Down : 5, 2018-08-05 13:04:36

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KOREA REPORT - JULY, 2018.

SKorea government on 1st delivered its opposition to the Trump administrations gestures to up tariffs on imported cars, claiming the tariff hike may negatively boomerang on the US economy, undermining the mutually beneficial trade environment, fostered by the Korea-US FTA. In May, President Trump ordered to investigate auto imports for potential cases of trade penalties, hinting at the possibility of a 25% tariff at maximum. Currently, the Korean car industry has invested more than $10 bil in the US, creating more than 110,000 jobs.

SKorea officially dropped its maximum workweek to 52 hours from 68 in an effort to improve the quality of life among its citizens. The new law, which was a campaign promise by President Moon, went into effect on 1st for businesses with more than 300 employees, state-run agencies and government offices. Under the law, workers in Korea will be allowed to work 40 hours and an additional 12 hours of overtime. Those who make their employees work more than 52 hours weekly now face up to two years in prison or a fine of up to KW20 mil ($17,960).
Minimum Wage Council on 14th set next years legal minimum wage hike rate at 10.9%, raising the hourly amount to KW8,350 ($7.40) from current KW7,530. Though the increasing rate was a slowdown from previous 16.4% hike and from the Moon administrations target timeline of raising the wage to KW10,000 per hour by 2020, the change added labor cost pressure upon small-sized businesses here. Federation of Korea Trade Unions on 16th complained the lower-than-expected increasing pace, suggesting the average wage hike rate for the next two years at 15.3%. On the other hand, Owner-operators and small-sized businesses vowed to boycott the new legal wage, citing excessive personnel costs, and demanded a phased hike.

NK continued to call on SKorea and the US to declare an end to the Korean War through its state-run media as it started to dismantle a key missile-engine test site. Rodong Sinmun said As the issue of the declaration of the end of the war is one of the agreements stipulated in the historic Panmunjom Declaration, NK and SKorea have a duty to implement it and the US enthusiastically supported it. It urged SKoreas active role in bringing a formal end to the war.
The Korean Armistice Agreement was signed 65 years ago on 27th, wrapping up negotiations that spanned 158 meetings over two years and 17 days, the longest negotiated armistice in modern history. During the negotiation period, UN forces suffered 140,000 casualties and the US lost 8,000 soldiers. Yet the resulting agreement has kept relative peace on the Korean peninsula for six decades, and enabled SKoreas remarkable rise to prosperity. By 1953, the Korean conflict threatened to escalate into a third world war, US military commanders, including President Dwight D. Eisenhower, had come to favor an armistice as a second-best solution. On July 27th, military authorities from China, NK and the US signed an agreement that ended hostilities. SKorea was not itself a signatory to the agreement as President Syngman Rhee refused to sign a deal that left Korea divided. But the US and SKorea signed a formal mutual-defense treaty within months of the ceasefire. It is this treaty that has provided the strategic foundation for the security and political relationship between the US and SKorea on basis of ideal on the democracy and freedomt. 

President Trump made it clear he would not seek the early denuclearization of NK, dashing hopes for a prompt, permanent resolution of the issue heightened by his historic summit with Kim Jong-un. He had pledged time and again he would not repeat the mistakes of past US administrations. He accused his predecessors of allowing the North to buy time to build up its nuclear arsenal and missile capability. Trump and his aides said the strategic patience policy of the Obama administration was nothing but inaction and that it was over. The latest developments show, however, that the world now is witnessing a sort of Trumpian patience.

It is under growing criticism for squandering taxpayer money to cope with the unintended effects of its income-led growth policy, which has resulted in reducing jobs and earnings particularly for low-income households. Countrys tax revenue amounted to KW255.6 tril ($226.6 bil) last year, up 9.5% on-year. Taxes collected from companies increased 13.5% on-year to KW59.2 tril, accounting for nearly a quarter of the total revenue. About 40% of corporate taxes last year was shouldered by manufacturing firms. Koreas tax revenue amounted to KW140.7 tril in the first five months of this year, up KW16.9 tril on year. Moon administration drew up a KW11 tril supplementary budget shortly after Moon took office last year and another one worth KW3.8 tril this year to help create more jobs and increase welfare benefits. The 2018 national budget set at KW428.8 tril marked a 7.1% rise from 2017.

HHI reported that its 2Q result (consolidated basis) logged KW3.1244 tril of revenue and KW175.7 bil of operating loss. Revenue expanded by 2.7% from 1Q, while operating loss rate deepened by –5.6%. While offshore revenue saw a decrease with NASR 2 project entering into the final phase, increasing sales of mid and large size marine engines and orders from 1H 2017 going into action, with the favorable exchange rate, led the overall revenue growth. Shipbuilding business made KW144 bil of operating loss, which was stemmed from rising material price, reserve for exchange loss, and compensation for retirees. Offshore business logged KW14.5 bil of profit thanks to change order approval of Bergading project and Baronia project in Malaysia. Engine business also logged KW7.1 bil of profit, 181% on-year improvement. An HHI official commented that market is showing signs of recovery with increasing ship price and inquiries, adding that there is still pressure left such as rising material price and lack of orders. HHI so far achieved 60% of its yearly goal, $13.2 bil.
HMD announced that its 2Q operating profit (on a separate basis) was KW13.97 bil ($12.3 mil), representing a 63.1% on-year decrease. The revenue in the period logged KW555.73 bil, down by 19.5% on year. Net loss recorded KW33.525 bil, turning to the red from the net profit of KW140.3 bil in the second quarter of 2017.
SHI announced that the company posted revenue of KW1.3466 tril ($1.19 bil), but saw a KW100.5 bil operating loss for the second quarter of 2018. The revenue saw a 8.5% increase on quarter, representing the first upturn for the first time in the last five quarters. SHI expects to see a slight increase in its revenue for the third and fourth quarters also.  From April to June, however, SHI saw a KW100.5 bil operating loss, which is worsened than a KW47.8 bil loss posted in the first quarter. The company explained that the loss results from fixed cost burden and additional KW39 bil loss related to delay in the delivery of one drillship for Ocean Rig. As of the end of June, SHI's debt reaches KW1 tril in total, with a debt-to-equity ratio of 105%. Compared to the end of 2017, the ratio saw KW2.1 tril and 33%p decreases, respectively.

It turned out that about 30 LNG carriers were newly ordered in the first half only. Global shipbuilding industry saw 16 new LNG carrier orders in the first quarter, followed by eight units in the second quarter. In addition to them, two FSRUs and two LNGBVs were newly ordered in the first half of this year. There were new LNG entrants such as Minerva Maritime of Greece and BOTAS of Turkey. It also emerged that Korean shipyards tool all the new orders excepting for the LNGBVs. Korean Big3 have filled all their LNG carrier slots scheduled until 2020, with nine units which are slated for delivery from 2021 to 2022.  LNG carrier price surpasses $185 mil apiece depending on vessel specifications, up from a $180 mil level reported early this year.

TOPICS.

SKorea government opposed Trump administrations trade war [p.2]

The US started to implement heavy duty on Chinese products, threatening trade partners [p.2]

A dam under construction by SK E&C in Laos flooded [p.4]

A heat wave in SKorea had killed at least 27 people [p.4]


SKorea dropped its max workweek to 52 hrs from 68, and raised min wage by 10.9% [p.5]


Choo Shin-soo's on-base streak for the Texas Rangers has come to an end at 52 games [p.7]


Jim Rogers said NK's opening will create huge chances for gains by SKorea [p.7]


NK continued to call on SKorea and the US to declare an end to the Korean War [p.8]


USA insists granting NK rewards after substantial denuke, while NK demanded earlier rewards [p.8]


President Trump confirmed not to seek early denuke of NK, overthrowing his earlier promises [p.9]


NKs economy contracted at the sharpest rate in two decades in 2017 [p.11]


Seoul cuts its growth estimate to 2.9% this year from 3.0% [p.12]


President Moons welfare expenditure grows [p.13]


Samsung Electronics was placed 12th on the list of the top 500 global companies [p.13]


Performance of conglomerates in second quarter [p.14]


SKorean biopharmaceutical companies expects a boost in their products exports to NAmerica [p.16]


SKorean soju brand Jinro became the best-selling distilled liquor in the world [p.16]


HMC signed sponsor partnerships with AS Roma and Hertha Berlin [p.17]


Trade and currency war between USA and China made KOSPI and KWon unstable [p.18]


SKorea's foreign exchange reserves came to an all-time high of $402.45 bil in July [p.18]


HHI, HMD and SHIs performance in second quarter [p.19]


Korean shipyards took all of LNG carriers newly ordered [p.20]


Creditors of DSME slows down the disposal process of the yard [p.23]


Sinokor MM continued to order newbuilding at Daehan and SWS [p.24]


Korea Ocean Business Corporation officially started its operation on 5th [p.24]


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