Korea's Top 5 Industries Face Oversupply Crisis

[DainBramaged]

Korea's major industries are at the great risk of being hit by oversupply problems in the global market. If automobiles, steel, petrochemicals, ships and semiconductors end up sinking due to a worldwide glut, the Korean economy is expected to face the greatest shock since the Asian financial crisis.

According to an internal Ministry of Strategy and Finance document obtained by the Chosun Ilbo on Sunday, the global automobile industry faced a 56.7 percent oversupply last year, while the steel industry was hit with a 37.7 percent glut. The oversupply ratio refers to the amount of production capacity that exceeds demand when production facilities are running at 100 percent. A ratio of 50 percent means there is enough production capacity to produce 50 percent more products than needed.

The ratios were 17.9 and 14.4 percent for the petrochemical and shipbuilding industries. In the semiconductor industry, the threat abated as the world's no.5 chipmaker Qimonda of Germany went bankrupt early last year, but still some products including NAND flash memory chips, a flagship item for Korea, are expected to face an oversupply.

These industries have propped up the Korean economy since the financial crisis last September. But as China and other emerging nations have increased investment in them to stimulate their economy, there have been growing concerns over worsening situations with rising productions, calling for urgent measures to deal with the problem.

◆ Worsening Supply Glut

There are fears that the global automotive industry would face the worst-ever supply glut this year. According to industry consulting agency Global Insight, demand is expected to total 66.1 million vehicles, while output capacity stands at 95.1 million, leading to a possible record oversupply of 29 million cars.

In the steel and petrochemical industries, advanced countries are either cutting down production facilities or keeping them at present levels. But emerging countries like China and the Middle East continue to expand production. The global supply capacity of steel is expected to rise 20.5 percent by 2020, from 1.66 billion tons to 2 billion tons. Ethylene is a chemical whose demand serves as an indicator of the prospects for the global petrochemical industry. Between 2008 and 2012, the Middle East accounts for 47 percent of new or expanded ethylene production facilities.

http://english.chosun.com/site/data/html_dir/2010/03/02/2010030200322.html


Which means increased potential for dumping here. And lower prices for American made goods threatening those indstries.