Industrial production maintained relatively high growth while the unemployment rate rose and the average rate of capacity utilization in the manufacturing sector dropped in November last year.

Industrial production in November, boosted by increased domestic sales of automobiles and computer and office-related equipment, saw a comparatively high growth rate of 9.8 percent. Other contributors to the rise in production included oil refining, booming exports of ships, and high sales of cars based on the introduction of installment payments with no interest. The heavy and chemical industry sector marked 14.0 percent growth while light industry saw a production decline of 5.2 percent in the month.

All thirteen major heavy and chemical industry fields recorded increased production. The biggest gainers were computer and office-related equipment (50.7%), other trans-portation equipment (24.3%), video-audio and communi-cations equipment (19.4%) and cars and trailers (17.9%).

In the light industry sector, all but two categories saw declining production rates. Rubber and plastic products (2.9%) and wood and wood products (2.9%) were the exceptions, recording slight growth. The slumping rates for clothing and fur products reached -18.7 percent; rubber bags and footwear hit -12.5 percent; and textile products dipped 9.6 percent. Light industry as a whole dove 5.2 percent on the heels of the previous month's -2.4 percent, sustaining the decline that has plagued the sector for seven consecutive months since last May.

Manufacturers' shipments in November advanced by only 8.0 percent from the corresponding period of 1995 and 2.0 percent from a month earlier due mainly to relatively slow progress in sectors such as oil refining, computer and office machines and other machinery and equipment. The heavy and chemical sector recorded a 10.6 percent growth rate while light industry's slight growth in October turned to decline, marking -3.0 percent. Shipments for export purposes rose 10.6 percent while domestic shipments grew 6.9 percent, returning to the levels seen during the third quarter of last year after October's relatively high growth rate.

The inventory rate in November stood at 17.3 percent, slightly down from October, thanks to a reduction of steel and construction material inventories and an increase in shipments of paper goods. Inventories for semiconductors (97.9%) rose due to a decline in shipments. And the rate for steel products (39.8%), cars and trailers (36.6%) and computers and office machines (34.3%) also maintained comparatively high rates. But inventories for other transportation equipment (-38.0%), cigarettes (-23.8) and rubber bags and shoes (-8.9%) continued to decline.

Production capacity, encouraged by new equipment brought on-line in the oil refining sector, increased 9.1 percent over November of 1995. Other transportation equipment (28.8%), oil refining (25.9%) and video-audio and communications equipment (25.6%) showed high increase rates while wood and wood products (-9.8%), textile goods (-9.3%) and rubber bags and footwear (-7.8%) recorded negative production capacity growth. The average rate of utilization of production capacity in the manufacturing sector maintained a level of 80.8 percent, down only 1.4 percent from October, due to expanded production facilities in the area of automobiles and metal.

Orders received by the nation's 200 leading construction companies reached $7,856 million in November, an increase of 53.2 percent from the corresponding period of 1995. This was mainly ascribed to a high increase of orders from the public sector pertinent to the construction of new airports, roads and land development and an increase in construction starts of houses and offices in non-manufacturing sectors. The aggregate order for construction as of the end of November last year stood 21.9 percent higher.

The area of construction for industrial purposes approved by related authorities declined slightly but the approval rate for housing and commercial purposes rose by 6.4 percent from the same month of 1995.

Orders received by the nation's 186 major machine makers amounted to $2,950 million in November, up some 29.8 percent from the same month of 1995 and 15.1 percent from the month earlier. Orders for the public sector, in particular, rose by 107.7 percent, mainly boosted by orders for the construction of nuclear power plants by Korea Electric Power Corporation. But orders for the private sector, particularly for the oil refining and chemical industry, saw only 8.1 percent growth.

Retailers and wholesalers in November saw an increase of 5.9 percent in sales amount compared with the 7.6 percent rise seen in the same month of 1995. Shipments of consumer goods in the domestic market climbed 6.7 percent. Retail sales recorded an 8.3 percent increase, encouraged by booming sales of passenger cars, home appliances and clothes while the wholesaler sector marked a 3.6 percent rise attributed primarily to brisk sales of commercial vehicles, fruits, vegetables and medical equipment.

Regarding durable consumer products in the domestic market, the increase in shipments stood at 16.8 percent. For security equipment (-36.6%), cabinets (-23.6%) and pagers (-15.6), declines were recorded while rates for mobile telephones (287.2%), large-size passenger cars (76.6%) and small-size audio systems (57.6%) sharply increased. Shipments of non-durable goods grew 6.7 percent. Rates for fur coats (27.2) and ready-made women's suits (21.6%) rose rather dramatically while those for tents (-70.9%) and alcoholic beverages (-30.1%) dropped.

Meanwhile, imports of consumer goods in November increased by 18.7 percent from a month earlier when the rate reached 26.6 percent.

Global R&D Networks Under Development
Despite booming sales in the industrial electronics sector, the entire electronics industry saw only $3,517 million in sales, a decrease of 19.2 percent in November from the same month of the previous year, mainly due to sluggish sales of electronic home appliances and semiconductors. Electronic home appliances saw a decrease of 9.6 percent, affected by a remarkable drop in the sales of VCRs and audio/video appliances although there were relatively high sales of refrigerators and microwave ovens. Exports of industrial electronics continued steady growth which began in the second half of last year to mark an 18.7 percent growth rate over November of 1996, due to brisk sales of mobile telephone sets and computer CPUs and steady exports of computer-related components like CDT and HDD. Exports of electronic parts, despite the increased sales of LCDs and electronic tubes, dropped 30.6 percent from the corresponding month of the previous year, as the prices of semiconductors failed to recover. In fact, exports of semiconductors decreased by 42.1 percent over the same period. Although the climate was ripe for the price of semiconductors to rebound when the BB rate (the ratio of order amount over forwarding volume) rose to 1.10 in the North American market, the price failed to recover due to makers' push to export the the large inventories that had built up and an increase in the ratio of shipments in current markets.

Major domestic electronics companies have focused efforts on globalizing their research and development systems by, for example, developing future style technology and setting up research centers in major target areas with a view to "glocalizing" the production lines. Samsung Electronics, for example, recently set up electronics research centers in Japan and India and plans to establish similar institutes in major market nations with a view to forming a global R&D network. LG Electronics also plans to set up a global network centered around research institutes in the United States, Japan, Germany and Russia and will concentrate on developing expert engineers in high-tech fields. Daewoo Electronics is poised to set up research and development centers in major developed nations and plans to focus on expanding its share in overseas markets based on the brisk activities of those R&D centers.

Recently, the three major makers of home appliances and audio manufacturers have begun to move their production lines overseas to avoid harsh competition because of the opening of distribution markets and to expand with the abolition of the measures designed to diversify Korea's import channels.

Domestic Sales Rise with Installment without Interest Plan
In November, automobile production rose to 269,000 units, up by 9.3 percent from the same month of the previous year, boosted by increased domestic sales amid booming exports and the expansion of the installment payment plan without interest. Domestic sales, in particular, rose to 151,000 units, an increase of 14.2 percent over the corresponding month of the previous year, prompted by hectic competition among the domestic car makers like Hyundai, Kia and Daewoo Motors which competitively offered installment sales without interest and expanded assistance for car agents. In addition to passenger cars, commercial vehicles like trucks and buses also saw high sales. Exports of cars also soared, reaching 139,000 units in November, up by 69.2 percent from the same month a year earlier, mainly thanks to expanded sales networks around the world and the companies' efforts to increase exports.

The domestic production of automobiles in 1997 is expected to see a more sluggish growth rate, reaching a projected 3,080,000 units, up 8.1 percent from 1996. The relatively slow growth prediction is based on an expected lackluster export environment and slower domestic sales of cars amid continuing economic malaise, although the production lines have been expanded with the completion of Daewoo's automobiles plant in Kunsan, Chollabuk-do and Hyundai's plant in Inju, Chungchongnam-do. Domestic demand is expected to stand at 1,710,000, an increase of 4.3 percent over 1996. The relatively low demand is likely to be prompted by continuing lethargic economic trends, relatively few new models, and a variety of governmental measures designed to curb the demand for cars like levying congestion fees, and raising gasoline prices.

Auto exports, however, are expected to increase by 12.3 percent to 1,370,000 units. Positive factors in this regard include the expected economic recovery in developed nations, the likely increase in demand from developing countries, and resumption of sales to Taiwan. But the continuing low appreciation of the Japanese yen is expected to weaken the price competitiveness of the Korean-made cars and domestic car makers are certain to face harsh competition in the markets of the developed nations as the car manufacturers there are poised to fortify sales of compact cars--traditionally Korea's bread-and-butter in those markets.

Growth Continues as Orders From the Public Sector Rise
The production of general machinery in November rose by 29.8 percent and 10 percent from a year earlier and the same month of the previous year, respectively, boosted by recovered exports and increased order amount from the public sector.

In November exports of general machines saw their first month of growth since July last year, increasing by 6.3 percent from the same month of 1995. Although the sales of chemical, transportation and lifting, and construction and mining machines experienced sluggish sales, overseas sales of machines pertinent to food processing (107.3%), packaging (43.6%), textiles (43.2%) and air conditioning (18.6%) saw relatively high growth rates over the same period of the previous year. Import growth rates of like machines ranged between 27.0 percent and 144.4 percent, up by 19.6 percent from November of the previous year. Aggregate imports through the end of November rose by 8.2 percent to reach $19.6 billion.

The nation's major machine makers, believing that the remarkable increase in exports will be difficult to achieve due to continuing low appreciation of the Japanese yen against the U.S. dollar and the economic slowdown in developed nations, especially in the fields like manufacturing and construction machines, are poised to concentrate on activating exports by developing new technology and exploring new markets in 1997.

Hyundai Heavy industries, for instance, is poised to expand exports into new markets like the Philippines, India and Pakistan while reinvigorating sales in the Middle East, which were sluggish in 1996. In a bid to diversify the export models, the company plans to develop new models like 15-ton and 18-ton class loaders. Daewoo Heavy Industries has decided to strengthen export marketing activities in Latin America, Australia, India, China and Southeast Asia. The company, with a view to coping with the weak yen, is planning to change its main export items while forging ahead with a plan to reduce production costs. Daenong Heavy Industries, for its part, plans to set up an overseas branch office in Belgium as its foot-hold to advance into the European markets. It has also sought ways to make inroads into Japan by sending samples to marketing agents there. Soosan Heavy, focusing on advancing into the European markets, is also planning to acquire the CE mark in the near future and to develop a new model of oil pressure breaker, its main export item.

Production of Crude Steel Levels, Exports Recover
The production of crude steel in November decreased to 3,236,000 metric tons (M/T), down 1.4 percent from a month earlier, but a 3.6 percent increase from the same month of the previous year, maintaining a similar level as the average figure in 1996. The production of furnace steel amounted to 1,911,000 M/T, far less than average, down by 4.4 percent from a month earlier and up 2.2 percent from the same month of the previous year. Output of electric furnace steel, despite production cuts, increased to 1,325,000 M/T, up by 3.2 percent over October and 5.7 percent from 1995's November.

Exports of related products dwindled to $531 million, a 5.6 percent decrease from October, when exports reached their highest level in 1996, and an 11.7 percent dip from the same month of the previous year. But average export unit prices decreased by $9 to $537 dollars per metric ton, as domestic inventories remained at high levels and competing nations lowered unit prices. Imports of steel products stood at $556 million, down 9.3 percent from a month earlier and 24.8 percent from 1995's November, the second lowest level yet recorded in 1996.

New Survival Tactics Explored
The domestic textile industry in November recovered only slightly from the previous month's lackluster period. Exports evolved into an increasing trend and inventories began to decrease, thanks to textile companies' efforts to achieve their export target for the year.

Overseas sales of fabric and yarn products rose by 32.0 percent and 5.1 percent from November of 1995, respectively. With that, exports of textile products as a whole increased by 0.7 percent to $1,448 million in November. But as exports of fiber and clothing goods continued to decline, exports of related products during the entire 11-month period of last year fell by 3.7 percent to $16,232 million. Exports of textile material and fabrics dropped by 12.0 percent and 11.5 percent to $73 million and $408 million, respectively. But overseas sales of yarn, which saw a 32.0 percent swell in October, rose again by 32.0 percent from the same month of the previous year to $136 million. Exports of fabric goods, despite sluggish sales of polyester products, rose by 5.1 percent to $831 million during the same period, encouraged by high sales of nylon and linen goods.

Although imports of end-use textile consumer products swelled significantly, overall imports of goods rose only slightly to $831 million in November, an increase of 2.5 percent from the same month of the previous year, mainly due to dwindling purchases of textile materials and yarns amid continuing economic slowdown.

In order to fortify competitiveness and maximize productivity, domestic makers of chemical textile products have embarked on efforts to equip themselves with full-fledged on-line production lines while seeking ways to further invest into foreign nations. Kolon set up a yarn factory in Vietnam while Kohap plans to open a new plant in China for annual production of 360 tons of chemical and textile yarn. Hyosung is also poised to establish production lines in Southeast Asia.

Orders Drop Almost 35 Percent
Orders for shipbuilding received by the domestic ship makers in November, boosted by high demand for tankers, stood at 685,000 gross tons (G/T) for 16 ships, but that was a drop of 34.8 percent compared with the corresponding period of the previous year. With this the aggregate order volume as of the end of November reached 4,457,000 G/T for 103 ships, a decrease of 27.0 percent from 1995's November. Orders for tankers made up 48.5 percent of the total, reaching 2,161,000 tons for 26 ships while orders for containers and bulk carriers stood at 1,339,000 G/T for 48 ships and 640,000 G/T for 11 ships, for 30.0 percent and 14.4 percent shares of the total, respectively. The period of relative lackluster shipbuilding orders was due to failure in strengthening competitiveness and marketing activities in the areas of Handi-size and Panamax-class ships which have emerged as main products in the world shipbuilding market.

In November, actual shipbuilding amounted to only 579,000 G/T for 12 ships, a decrease of 17.4 percent from the same month of the previous year but total shipbuilding during the January-November period rose by 3.9 percent, encouraged by production facility expansion, productivity enhancement and decreased number of labor strikes. Residual orders amounted to 11,441,000 G/T for 257 ships, slightly up compared with a month earlier when it stood at 11,348,000 G/T for 257 ships, but down by 15.9 percent from the same period of the previous year.

Recently, domestic shipbuilding companies have embarked on efforts toward management and processing renovation designed to raise productivity. Daewoo Heavy Industries, which had already developed the so-called "interface between ship body and design," has also developed a new program enabling layout work while freely exchanging information between CAD programs with different systems. Samsung Heavy Industries has become able to comprehensively analyze the shipbuilding work process by developing a state-of-the-art production management system. Hyundai Heavy, which has developed a new production method using guise pieces in the block loading process, began focusing resources and manpower on the production sector.

Demand Recovers but is Overshadowed by Supply
Prices of petrochemical products in the international market, despite recovery in demand, have remained stagnant since October of last year due to a surplus in supply which resulted in completion of the regular NCC repair and maintenance period and expanded production facilities. The international price of Naphtha, affected by the hike in the oil prices, sustained a steady increase rate during the latter half of last year and the domestic price of the basic material reached $219 per ton, an increase of 3.2 percent from a year earlier. Of the synthetic resin products, prices for Low Density Polyethylene (LDPE), and PVC rose slightly although those for HDPE, PP and PS plummeted by $20 to $40 per ton, maintaining an overall stagnant trend while the synthetic material goods also failed to escape the slump.

Domestic production of petrochemical goods, coupled with a regular repair and maintenance period for some companies, plunged in November compared with the same period of the previous year but recorded a slight boom over a month earlier, caused by an increase in seasonal demand and exports of goods in inventory. The production of NCC and other oil-related goods by Daelim and Yukong declined by 3.3 percent from a month earlier due to their repair and maintenance period but saw a 10.5 percent increase over the corresponding period of the previous year, thanks to facility expansion in the sectors of synthetic materials and resins. Boosted by recovery in the polyester business, domestic demand for synthetic materials like TPA and EG rose sharply while synthetic resin and synthetic rubber also saw similar growth rates of 16.4 percent over the same month of the previous year. Exports, boosted by expansion of production facilities for synthetic materials and synthetic rubber, picked up 7.2 percent on November of the previous year but decreased 2.7 percent from a month earlier.