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Asia's exports slip on
oil
By Alan Boyd
SYDNEY
- The oil crunch and faltering demand for consumer
electronics goods are starting to show up in
external trade accounts, with global development
agencies already trimming growth forecasts in
anticipation of an export slowdown.
As of
mid-May, bulk oil prices had risen by 20% from
December 2004. Crude oil in Dubai, regarded as an
Asian benchmark, was up 52% in April from the same
month a year earlier, putting import-dependent
economies like Japan, Korea, Thailand and
Singapore under immense strain.
Manufacturers have so far weathered the
onslaught surprisingly well, helped by
historically low interest rates and appreciating
currencies, which have kept inflation in check by
softening the blow and containing other input
costs. Rates average 3.5% in emerging Asia, the
same as inflation, and little change is expected
with either. But industry cannot hold out
indefinitely, as the flip side of the currencies
surge has been a loss of export competitiveness
that will become more apparent in the second half
of the year, shrinking trade surpluses and putting
pressure on current account balances.
Consumer demand remains fairly robust in
Asia but continues to fall in the Euro belt and
North America, despite signs of a reawakening in
some US markets. Emerging Asia, defined by
economists as China, India, Hong Kong, Singapore,
Indonesia, Malaysia, the Philippines and Thailand,
has the greatest exposure.
A study
released by the International Monetary Fund (IMF)
in late May predicted that gross domestic product
(GDP) in these countries would grow by a more
subdued 6.5% in 2005, down from an earlier
forecast of 7%. The World Bank expects growth of
only 6%, compared with 7.2% in 2004, while the
Economic and Social Commission for Asia and the
Pacific (ESCAP), a regional United Nations agency,
has forecast an expansion of 6.2%. Both estimates
have been revised downwards. In Asia as a whole,
including its only advanced economy, Japan, the
IMF has predicted an expansion of 5.25% and ESCAP
5.2%, after 6.25% growth in 2004. To put this in
perspective, last year's growth was the highest
for almost a decade.
Oil dependency has
become the defining growth factor, with net
importers like Japan faring markedly worse than
producers like Malaysia and - to a lesser extent -
Indonesia. Japan's imports soared by 12.7% in
April year-on-year because of an oil reliance that
has hovered around the 80% mark for decades. A
report by the Natural Resources and Energy Agency
warned last week that the country would face
severe supply problems within 25 years. Export
revenues recovered slightly in April due to higher
demand for automobiles and steel, but were still
down in the first quarter because of a sharp drop
in shipments to Asia as the oil costs were passed
on. The trade surplus narrowed by 10.4%.
Thailand, which imports 90% of its fuels,
including most crude oil, registered a 30%
increase in imports in the same month, pushing the
trade deficit to its highest level since the
export meltdown of 1996, which led to a regional
economic crisis in the following year.
South Korea, totally reliant on imported
oil, posted a 12.5% rise in imports and a modest
7.7% increase in exports compared with the same
period a year earlier. Shipment value in March had
been a record in dollar terms. Singapore's key
non-oil exports grew by 4.6% in April compared
with March, but the data were distorted by the
biggest decline for two years in the previous
month, when shipment value was down by 6.7%.
Almost all of the republic's oil is imported. In
contrast, Malaysia's exports surged by a record
16% in March against the same month in 2004
because of higher oil, gas and refined petroleum
prices, and a similar performance was expected
last month.
Crude oil exports rose by
51.4%, liquefied natural gas exports by 34.5% and
refined oil products by 31.6%. Indonesia, though
no longer a net oil exporter, still has enough gas
reserves to take advantage of the spike in global
prices. Export revenues surged by 31.4% in April
compared with the previous month, and 11.5% on a
yearly basis.
Buoyant electronics sales
have been a key factor in recent export growth,
with Asian sales of semiconductors increasing by
41% in 2005 following a revival in most segments
in the second half of 2003. But while there is
still healthy growth in some consumer markets, the
bubble is bursting for some exports as input costs
rise. Stockpiling adjustments of materials were
inevitable after the phenomenal surge of the past
two years, but the extent of the decline, also
attributed to static consumer demand in North
America and Western Europe, has nonetheless
unnerved exporters.
Semiconductor
Equipment and Materials International (SEMI), the
California-based consortium, recorded a 12% drop
in worldwide semiconductor equipment bookings in
the first quarter from the final three months of
2004 and a 21% slump year-on-year.
Korea,
which has been slower in catching up with the
global trend, was the only significant electronics
manufacturing country to register increases in
both accounting periods. Bookings were up by 165%
on a quarterly basis and 61% compared with the
same period in 2004. Taiwan's quarterly bookings
were down by 41% and its yearly orders by 35%.
Chinese assemblers recorded declines of 2% and 38%
respectively, while the Japanese industry managed
a 6% quarterly increase but a 38% drop on a yearly
basis.
Wafer shipments fell by a more
modest 2% in the first quarter compared with the
final three months of 2004 and 4% on the same
period in 2004, according to the SEMI monitoring
report. Demand remains strong for chips, but
supply problems dating from late 2004 are boosting
prices and narrowing profit margins, though some
producers are benefiting from currency
appreciations that have reduced imported material
costs.
Despite assurances from Intel, a
worldwide shortage of 20-30% was expected by the
end of the first quarter, as the leading supplier
has indicated it will keep inventories tight to
improve margins as consumer demand fluctuates.
Other suppliers are more bullish, with Japan's NEC
Electronics Corp boosting capacity of
300-millimeter wafers for chips used in consumer
electronics by 43% through a new production line
in expectation of a recovery in demand.
The IMF warned in its report that all
Asian producers would be affected to varying
degrees as the industry adjusted, since
electronics and information technology shipments
account for as much as 40-60% of total export
revenue and thus influence overall growth
prospects. Monetary policies will have a critical
bearing on shipment profits as exchange regimes
are manipulated to satisfy two conflicting - yet
interrelated - challenges: how to ensure exports
stay competitive while oil-fueled inflation is
kept at bay.
In Singapore, where the
currency has long been used as an inflation hedge,
equipment suppliers like Chartered Semiconductor
Manufacturing and Creative Technology have seen
the biggest cost blowouts. LG Electronics Inc, the
second-biggest Korean consumer electronics
producer, reported an 86% decline in profit the
first quarter as the stronger won reduced export
earnings and a flat-panel unit recorded sharply
lower sales.
Only in China, where the yuan
is effectively pegged to the dollar, and exporters
have gained competitively from the weakening
greenback, have shipments been largely unaffected:
export sales of technology goods rose by 33% in
the first quarter, and shipments of electrical
equipment and electronic exports were up by 30%.
Alan Boyd, now based in Sydney,
has reported on Asia for more than two
decades.
(Copyright 2005 Asia Times
Online Ltd. All rights reserved. Please contact us
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