Local industries were seen bracing for the impact from the recent surge in the Korean won against the U.S. dollar exchange rate amid lingering concerns of a debt crisis in the European region.
On Friday, the local currency ended at 1,112.5 won against the greenback, with the exchange rate stabilizing slightly after surging on five straight days last week.
But the worries are far from over due to nagging concerns over Europe’s financial health, industry watchers said.
Many are now expecting the exchange rate to soar as high as 1,600 won against the dollar should Greece default on its debt payments. Greece is denying such rumors, but experts here have said the possibility is quite high.
For those importing raw materials, such as food-stuff manufacturers, airliners and oil refiners, the strong dollar will no doubt dent their profit.
CJ Cheiljedang, which is the biggest grain importer in the country, will be losing an annual 3 billion won ($2.6 million) for every 10 won drop in the local currency. For Korean Air, it will cost an annual 64 billion won, while Asiana Airlines will suffer 7.6 billion won losses, according to industry calculations.
Refiners, who purchase oil from overseas as Korea has no such resources, may have to raise gas prices again, not because of supply-side factors, but because it will become more expensive to buy oil.
Small- and mid-sized companies were expected to be harder hit, since most have no means to cope. Up to 40 percent of SMEs said in a recent survey conducted by the Korean Federation of Small and Medium Business that they lack contingency plans.
“The growing burden of raw material prices are always one of the biggest concerns of these smaller companies, and this burden is now expected to become even heavier,” said one official of the federation.
On the other side of the pendulum, however, exporters are rejoicing as the weak won would help bolster their profit as their products become cheaper in the global markets.
Carmakers are expecting bigger sales for this year, as for every 10 won fall, Hyundai Motor’s sales rise by 1.2 trillion won, while Kia Motor will see an 80 billion won increase.
Shipmakers also expect more orders should the exchange rate continue to surge.
For electronics makers, while the weaker currency is more advantageous, the profit margin would not be as wide as expected since they import materials and components.
More tourists may visit the country to take advantage of the currency situation, causing department stores to anticipate bigger sales.
“We are expecting the tourists to come in from Japan and China,” said a local department store staff member, saying Japanese customers accounted for about 10 percent of sales at one of its chains when the Japanese yen gained against the won.
By Kim Ji-hyun (
jemmie@heraldcorp.com)
