Despite operational reductions in automobile production, sluggish shipments of audio and telecommunications equipment and lower demand for non-metal mining goods and assembly metal products, Korea' industrial production was up 7.9 percent in July, an increase comparable with same month last year. Output was boosted by brisk sales of semiconductors, chemical goods and ocean-going vessels to overseas markets, plus a rise in the domestic demand for oil refining products. Compared to June production of automobiles decreased, but the entire industrial production rose 0.2 percent, thanks to booming exports of semiconductors and ships. However, the production gap between heavy and chemical industries on the one hand and light industries on the other has continued to widen, with the production in former sector registering a 10.7 percent rise and that in the latter posting a 3.3 percent drop.

Of the 13 sub-sectors of heavy and chemical industry, all other than medical, optical equipment and watches (off 19.2 percent), automobiles and trailers (off 5.4 percent) and assembly metal goods (off three percent) posted increases. In particular audio, video and telecommunications equipment (up 46.6 percent), transportation equipment (up 23.8 percent), and oil refining goods (up 17.8 percent) recorded comparatively high growth rates.

In the light industry sector, production contracted in seven of the nine major sub-sectors.

Forwarding Sustains High Growth
The forwarding of manufacturers' oods in July increased 9.7 percent compared with the same month in 1996. Forwarding was boosted in this sector by booming overseas sales of semiconductors, chemical products and shipping, maintaining the recovering trend seen during the second quarter of this year. This represents a 1.8 percent increase compared to June.

Forwarding for exports rose 27.6 percent, maintaining the pace of increase established in April. Forwarding for the domestic market meanwhile shrank by 3.1 percent.

Inventories Post Single-Digit Rise for First Time Since June, 1995
Inventories as of the end of July recorded an increase of 9.6 percent. This was the first single-digit increase since June, 1995. Inventories in total decreased 0.2 percent compared to June's levels, due to falls in inventories of steel products, automobiles and computer and office-related goods.

Average Operating Rates in Manufacturing Steady at 78.8 Pct
The average operating rate in the manufacturing sector in July declined by 4.5 percent compared with the same month last year. Increase in rates for the machinery equipment, cigarette and chemical goods sub-sectors was countered by decreases in audio and telecommunications equipment.

Compared to June, operating levels in the automobile, audio and telecommunications equipment sub-sectors remained lackluster while levels in machinery equipment, computer and office-related products and chemical goods saw relatively brisk increases. Industries which marked increases in capacity usage included machinery equipment (up 12.3 percent) and wood and wood products (up 8.1 percent) while those that recorded decreases included audio-video and telecommunications equipment (off 25.8 percent), leather, bags and shoes (off 22.9 percent) and automobiles (off 14.0 percent).

Order Receipts in Construction Sector Decline 3.1 Pct
Orders received by the nation' major 250 construction companies reached 3,863 billion won in July, a decrease of 3.1 percent from the same month last year. The decrease was due mainly to a drop in public sector orders for land formation and road and bridge construction, and in the private sector, a slide in orders for machinery facilities and the construction of plants and warehouses.

Public sector orders posted a 26.1 percent fall, due to fewer orders associated with road and bridge construction (down 66.4 percent) and land development (off 31.6 percent), despite a surge in orders for railroad construction (up 1,486.8 percent). Private sector orders increased only 1.9 percent, mainly because of sluggish demand from the manufacturing area in which falls ranging from from 31.7 to 54.5 percent were registered. Orders from the non-manufacturing sector took a positive trend, though, recording rates of growth ranging 3.4 percent for housing and up to 48.1 percent for office construction. Compared to a month earlier, orders from the construction and engineering sectors marked an increase of 3.1 percent, and a contraction of 6.7 percent, respectively.

Order Receipts for Machinery Goods Rise 5.4 Pct
Orders received by the nation' leading 186 machinery makers amounted to 1,757 billion won in July, an increase of 5.4 percent on a year-to-year basis. Orders from the public and private manufacturing sectors were lackluster but the orders from the construction, transportation, storage and telecommunications sectors registered high rates of increase. The torpid level of order issuance from the domestic machinery sector was mainly due to the continuing economic downturn putting a damper on investment plans.

Public sector machinery orders experienced a slight increase of 1.2 percent, a performance strongly affected by a weakening of orders from the electricity generating industry (off 58.3 percent), and despite surges in demand from the transportation (up 198.3 percent) and telecommunications (up 89.5 percent) sectors.

Order issuance from the private sector registered a rise of 6.0 percent from July 1996. In particular, orders for assembly machines rose 23.5 percent while those from the food and beverage (off 54.7 percent), shipbuilding (off 32.4 percent) and automobile (off 5.0 percent) industries, in leading order resulted in the entire manufacturing sector showing a 3.6 percent drop in demand. Orders from the non-manufacturing sector though rose 22.0 percent, due to marked demand from the agricultural, fishing and forestry (up 57.4 percent), construction (up 30.7 percent) and transportation and telecommunications (up 15.8 percent) sub-sectors.

Imports of machinery goods dwindled by 20 percent compared to July 1996. This represents a deepening of the negative trend begun in June when orders were off 13.5 percent from May's level. The forwarding of machinery goods increased only 1.8 percent on a year-to-year basis.

Sales in July Increase 4.9 Pct Over a Year Earlier
July' wholesale and retail sales, boosted by brisk marketing of automobiles on an installment basis, rose 4.9 over the same month of last year. However, sales failed to stage a full recovery due to the continuing economic downturn. In the wholesale sector, which posted a 5.2 percent growth on a year-to-year basis, sales of fruit and vegetables increased 21.5 percent while those of chemical goods and foodstuffs soared 14.9 and 8.0 percent, respectively.

Wholesale sales of beverages, shoes and bags, on the other hand, decreased 7.2 and 5.8 percent, respectively. The retail sales area registered 4.7 percent increase, thanks to high sales in the sectors of individual transportation equipment (up 18.4 percent), oil service facilities (up 6.0 percent) and home appliances (up 5.8 percent).


Electronics Goods, Parts Post Steady Export Increases

The shipments of electronics goods stood at US$3,458 million in July, an increase of 17.9 percent from a year earlier, boosted by booming sales of industrial electronics goods and components, and in the face of declining sales of home appliances. The relatively sharp rise in exports of industrial electronics goods to US$788 million, an increase of 27.7 percent over a year earlier, was mainly due to brisk sales of computers and wireless telecommunications equipment. Shipments of communications equipment in particular rose 45.2 percent to reach US$183 million, boosted by an aggressive export drive. Exports of computers, meanwhile, also recorded marked increases. Shipments in this regard increased 27.4 percent to US$444 million, boosted by a recovery in overseas markets. In the electronics home appliances sector, exports of washing machines and refrigerators soared more than 20 percent, but total exports of the entire category declined by 18.8 percent to US$511 million, due to weakness in the sales of video goods (off 43 percent) and microwave ovens (off 19 percent). Shipments of electronics components increased 28.1 percent to US$2,159 million. Exports of semiconductors rose to US$ 1,495 million, up 36.6 percent on a year-to-year basis. CRT exports grew 30.5 percent to US$101 million while LCDs posted US$78 million in exports, more than double the total for July 1996. With the rapid shift of electronics industry key technology to a digital mode, domestic companies have progressively introduced digital goods such as DVDs, digital cameras, Internet TVs, and PDAs to the market.


Sales of Autos Hit Record High in Domestic, Foreign Marts

The production of automobiles amounted to 213,000 units in July, off 7.5 percent from the corresponding period last year. The fall-off was due to reduced operations for inventory adjustment purposes mainly on production lines of small-size compact cars. Sales of automobiles, though, boosted by strong demand in domestic and overseas markets, rose to 267,000 units, an increase of 29.2 percent over the corresponding month of 1996. Domestic sales in particular reached their highest point ever at 162,000 units, an increase of 21.4 percent on a year-to-year basis. The achievement was due in the main to special sales efforts by the financially ailing Kia Motors Corp. and new sales tactics employed by the Hyundai and Daewoo Motor Cos. Passenger car sales experienced an increase of 25.5 percent to 127,000 units while sales of commercial vehicles posted a 8.7 percent rise to 35,000 units.

Car makers' efforts to diversify their overseas markets paid off handsomely in July when exports of automobiles soared to 105,000 units, an increase of 43.5 percent over the same period in 1996. Price competitiveness of Korean-made cars in major markets continued to weaken though, edged by declines in the prices of Japanese cars occasioned by the continuing depreciation of Japanese yen. By region, exports to Western Europe rose 56.9 percent to 32,000 units but the shipments to North America, outsold by Japanese cars, dwindled by 35.8 percent to 13,000 units. Sales in Latin America increased by more than 200 percent. Exports of automobile components to the Asian region remained extremely weak due to the termination of Indonesia' national car project, a joint venture to build a standardized car involving financially-troubled Kia Motors.



General Machinery Exports Increase

The exports of general machinery increased to US$570 million in July, up 19.0 percent from a year earlier, stimulated by efforts on the part of manufacturers to expand shipments. The cumulative export trend took a positive turn by the end of July, reaching US$4,189 million or an increase of some 0.9 percent on the same month the year before. Shipments of chemical machinery, lift and transportation equipment and construction and mining machinery increased 325.5, 114.5, and 43.0 percent, respectively. Metal manufacturing machinery and farming equipment registered relatively low growth rates of 16.3 and 29.5 percent, respectively.

The imports in this category decreased by US$1,362 million, down 38.0 percent on July 1996 as a result of continuing lackluster facility investment by domestic corporations. Imports of air conditioning, construction and mining and textile machinery experienced increases of 8.7 to 24.0 percent while those of chemical machines, paper and printing machines, farming tools and metal and manufacturing machines registered relatively high rates of increase in the order of 15.2 to 53.7 percent. The trade deficit in this sector has narrowed to US$793 million, a reduction of 53.9 percent on the corresponding period last year.


Rise in Tranker Orders Leads to Brisk Biz

The orders received by the nation' shipbuilding companies in July reached 1,236,000 G/T, 6.5 times the value received during the same month last year. Boosting the total were large orders for automobiles carriers, carriers for chemical products and high value-added ships. The largest share in orders was taken by tankers, new demand for which amounted to 925,000 G/T. Meanwhile, orders were received for three car carriers and two chemical goods carriers.

The volume of shipping completed rose by 14.3 percent to 545,000 G/T for a total of 10 ships, major docks operating at high capacity. However, cumulative shipbuilding decreased to 3,787,000 G/T during the January-July period, down 13.3 percent from a year earlier. Remaining orders as of the end of July stood at their highest-ever level of 15,830,000 G/T for a total of 307 ships.

The shipping companies have begun to focus on raising their profitability rather than seeking more orders, by, for instance, strengthening their efforts to land orders for higher value-added ships. Hyundai Heavy Industries has recently received orders for building a 154,000 DWT-class oil carrier equipped with two engines and propellers, the price of which is set 20 percent higher than similar vessels built by a competing Norwegian firm. It has also gotten orders for five 30,000 ton-class carriers for chemical products from MISC Co. of Malaysia. Daewoo Heavy Industries achieved a first among domestic shipbuilders by winning an order from GNMTC of Lybia for a massive cruise ship capable of carrying 710 people, while Samsung Heavy won orders for two automobile carriers from an Australian company.


Production of Steel Goods Declines Amid Low Demand

The continuing low demand for steel goods has led to cut-backs by producers. In July, production rose only 0.3 percent on a year-to-year basis and 4.9 percent from June, to 3,292,000 M/T. Production of furnace steel products decreased 0.8 percent to 1,979,000 M/T due to continuing repairs at the Pohang Iron & Steel Co. The production of crude steel goods, however, increased 2.2 percent from a year earlier to 1,313,000 M/T on account of an expansion in facilities undertaken late last year. Compared to the previous month, though,production decreased 9.5 percent as a result of torpid production at Kia Motors and the summer holiday season. Domestic demand for steel products also dropped. It fell to 3,117,000 M/T, down 2.1 percent from the same month last year, amid lackluster economic trends in general and the Kia crisis in particular. The demand for section steel, in particular, decreased 16.1 percent in the absence of the kind of strong demand from the construction industry as seen the month before. Exports, boosted by a recovery in overseas markets, increased 21.2 percent from a year earlier to US$575 million; imports, on the other hand, decreased 2.4 percent to US$696 million.



Export Recovery Pushes Textile Ind. to Year's High Point

A recovery in exports of clothing spurred the textile industry to its best performance of the year in July. Shipments of textile products soared to US$1,779 million in July, an increase of 8.4 percent over the same month last year. Shipments of textile yarn, boosted by brisk exports of polyester staple fiber, rose by 40.3 percent to US$87 million. Meanwhile the sharp increase in exports of synthetic fiber filament yarn contributed to the overall rise in industry shipments. Led by a boom in sales of knitted fabric products in overseas markets, exports of fabric goods climbed to US$972 million, up 4.4 percent from the same period last year. Shipments of textile-related goods rose to US$566 million, up 4.2 percent on a year-to-year basis, boosted by brisk sales in all export markets except Japan. Shipments of yarn and fabric goods rose in the United States, Japan and Europe while those of fabric products remained lackluster in Japan, Hong Kong and the United Arab Emirates. Imports of synthetic fabric material increased remarkably and the entire imports in the textile area shrank 4.2 percent to US$ 448 million.


Record Increase in Petrochemical Production & Forwarding as More Facilities Come On-line

Production and forwarding of petrochemical products posted relatively high growth rates in July, due to the end of the annual plant maintenance period and the opening of additional production facilities. Boosted by facility expansion and a heightened operating rate, the production of petrochemical goods registered increases between 11.7 and 28.4 percent.

The production of synthetic material and synthetic rubber rose 61.4 percent and 20.3 percent on a year-to-year basis respectively. Domestic demand for synthetic resin remained at the same level as June's, the result of torpid business conditions in client industries. The demand for synthetic material and rubber, however, increased steadily. Synthetic material, chiefly TAP and EG, headed July's growth in the petrochemical industry, posting a 48.4 percent increase in forwarding for domestic markets.