In the main meeting on November 17, our approach was as follows:
After a remarkable Q3 GDP result which showed Korea was still growing by 3.1% YoY, but offset by the QonQ growth of 0.3% (annualised US style 1.2% growth) and the drop in exports in October, we will take a look at what Q4 appears to hold. We will also look at the fragility of financial markets and how the problems of an obscure company in Chuncheon could threaten the entire bond and commercial financial market with continuing reverberations.
Underwriting much of Korea’s economic activity is the role of energy and the pricing of energy in the Korean economy. As the world energy crisis evolves 2022-2023, how different is Korea from the rest of the world? Korea imports nearly all its energy and is the world’s eighth largest energy consumer almost equal to Germany which is the seventh largest, which makes for interesting comparisons when it comes to GHG emissions. The argument made in the media is that Korea is facing an energy crisis this year or more exactly an energy pricing crisis.
Unlike those countries where consumers create a high proportion of GHG emissions, Korea’s industry takes a large amount of Korea’s energy, said to be 55% of electricity before the other sources of energy are added. Electricity is sold at lower than world prices to industry. In Samsung’s accounting for the cost of manufacturing chips in Korea compared with TSMC, the only element out of labour, land, capital and water that is cheaper in Korea than Taiwan is electricity, by about 20%.
We will look at Korea’s current balance of energy sources – coal, oil, gas, nuclear and its low renewable base, to produce a basic energy matrix to the degree that data available permits. We will assess the crisis in terms of the companies involved, KEPCO, Korea Gas Corporation, KNOC and the refiners SK, GS, S-Oil and Hyundai Oil Bank, and the balance of energy products outputs – refined petroleum products and petrochemicals – which include energy exports and the highest energy users and the need for RE100 renewables to keep exports flowing.
Since COP-27 will be drawing to a close on November 17 we will end with a note on Korea’s progress in reducing GHG by 2030 which is enshrined in a law of March 2022 as not less than by 35%.
I will review the material and discussion with any appropriate updates of November monthly data and Exports and Imports with a little more emphasis on the disappointing results of COP-27.
Join us for an interactive discussion online at 8 am on December 6th.
Tony Michell Ph.D
Managing Director, KABC Ltd.