 |
Photo = Yonhap news |
[Alpha Biz= Reporter Kim Jisun] On the 9th, the exchange rate for the Korean won against the U.S. dollar opened at 1,426.0, up by 6.8 KRW. Following the declaration of a state of emergency on the 3rd, the exchange rate spiked to 1,446.5 KRW. Although it seemed to stabilize after financial authorities announced liquidity supply plans, it rose again to the 1,420s on the 7th, reaching its highest level in over two years.
Market analysts predict that the high exchange rate will continue through the second quarter of next year. Some fear that if the situation persists, the exchange rate could jump to the 1,500 KRW range.
Another variable is the upcoming inauguration of President Trump’s second term. Trump has pledged to impose universal tariffs of 10-20% on all imported goods, which could lead to a decline in the value of currencies from export-dependent countries like South Korea. This would intensify the depreciation of the Korean won.
For export-driven companies, rising exchange rates are generally negative in the medium-to-long term. In addition to rising raw material costs, the global investment burden increases, and companies with significant foreign currency debt may face larger currency losses.
For instance, the semiconductor industry, South Korea’s top export category, is seeing investment risks from high exchange rates outweighing the immediate benefits to profitability. Samsung Electronics and SK Hynix, both pushing for large-scale investments in the U.S., are likely to see massive increases in investment costs due to the rising exchange rate.
Samsung plans to invest $17 billion (approximately 24.2 trillion KRW), while SK Hynix plans to invest $3.87 billion (approximately 5.5 trillion KRW) in U.S. semiconductor factories. A simple calculation shows that for every 10 KRW increase in the exchange rate, Samsung would have to shoulder an additional 1.7 billion KRW in investment costs. Other companies, such as LG Energy Solution, Samsung SDI, and SK On, which have heavily invested in U.S. factories, are also monitoring the exchange rate closely. With significant dollar-denominated debts, they too are likely to face currency losses.
As of the end of Q3, LG Energy Solution had dollar-denominated debt of approximately 6.83 trillion KRW, exceeding its dollar assets (about 4.44 trillion KRW). The company’s business report stated that a 10% rise in the exchange rate could result in a pre-tax loss of 238.9 billion KRW.
Industries with large raw material import costs, such as petrochemicals, refining, and steel, are also expected to see profit declines. The petrochemical sector, which has been struggling with poor performance due to supply oversupply from China, relies heavily on imported crude oil for production. The refining industry, despite increasing exports, faces significant cost pressure as it purchases all its oil in dollars.
Similarly, the steel industry, which imports materials like iron ore and coking coal, is facing rising costs. However, with steel demand declining due to the global economic slowdown, it is difficult to pass on raw material price increases to product prices.
The aviation industry, with high fuel cost ratios, is also vulnerable to exchange rate fluctuations. Most airlines lease aircraft and pay lease fees in dollars, so when the exchange rate rises, their fixed costs increase significantly.
알파경제 Kim Jisun (stockmk2020@alphabiz.co.kr)
