The main driver is a massive jump in semiconductor prices, strong enough to counter the effects of a rising won, which would normally make exports cheaper. The trend signals that South Korea's tech industry is gaining pricing power as global demand for chips and AI-related technology continues to surge.
The index gauging export prices rose 2.1 percent from the previous month and 10.7 percent compared with the same month last year. It is the highest since July 2024, when it stood at 13.0 percent, a significant leap from the 7.8 percent rise seen in January, according to the Bank of Korea (BOK) on Tuesday.
The surge is particularly notable, given that it came despite a 0.5 percent strengthening of the won against the greenback, with the exchange rate moving from 1,456.51 in January to 1,449.32 in February. Typically, a stronger won makes South Korean exports cheaper for foreign buyers, but the strong momentum in the semiconductor market outweighed the effect.
Semiconductor-led surge
The electronics sector led the rally, with prices for computer, electronic, and optical devices skyrocketing 44.1 percent year-on-year. In particular, DRAM and flash memory prices soared by 123.5 percent and 139.1 percent, respectively. On a monthly basis, computer storage devices saw a staggering 32.6 percent increase.
Overall industrial products rose 2.1 percent from the previous month, further supported by a 7.0 percent jump in coal and petroleum products. In contrast, transportation equipment and chemical products continued to struggle, falling 3.1 percent and 6.6 percent year-on-year, respectively.
Energy prices drive up import costs
The import price index also edged up 1.1 percent month-on-month, primarily due to rising crude oil prices. The average price of Dubai crude rose 10.4 percent in February to $68.40 per barrel, up from $61.97 from the previous month.
Raw materials led the increase with a 3.9 percent rise during the same period. However, capital and consumer goods saw slight declines of 0.1 percent and 0.2 percent, respectively, as the strengthening won helped temper the cost of finished imports.
Dramatic improvement in trade terms
These February figures highlight a significant shift in South Korea's trade dynamics. The net terms of trade index - which measures the volume of imports a country can buy per unit of exports - jumped 13.0 percent year-on-year. This was the strongest growth in years, as export prices in dollar terms rose 10.3 percent while import prices fell 2.4 percent.
The income terms of trade index, reflecting the total purchasing power of exports, saw an explosive 31.8 percent growth - fueled by a 16.6 percent increase in total export volume, particularly in the electronics sector where volumes skyrocketed by 50.9 percent.
The unprecedented performance in the semiconductor sector has fundamentally altered the trade landscape. The rise in export prices despite the won't appreciation indicates that South Korea's tech exports are increasingly driven by market dominance and structural demand rather than simple price competition.
Outlook for March remains grim
However, the outlook for March is expected to be sharply different as the escalating conflict in the Middle East that began with U.S.-led airstrikes on Iran late last month has triggered extreme volatility in energy prices and exchange rates.
The surge in global crude prices has raised concerns over a spike in import costs. Brent crude, which traded near $72 per barrel at the end of February, has climbed past $100 per barrel as of Monday. West Texas Intermediate (WTI) has also risen above $90 per barrel. Most critically for South Korea, which sources 70 percent of its crude from the Middle East, Dubai crude is approaching $130 per barrel as of last Friday.
The won briefly broke the psychological barrier of 1,500 per dollar during intraday trading on Monday, though it closed at 1,497.5, its worst session since the 2008 global financial crisis, a more than 4 percent jump from the Feb. 27 closing price of 1,439.8.
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