WorldCity, Annual Report: No. 12 South Korea- Fine-tuning a trade balance | Connecting Local Business Leaders To The Global Economy

Annual Report: No. 12 South Korea- Fine-tuning a trade balance

July 6th, 2006

The trade exchange with South Korea is one of Houston’s most equitable.

Balance.

That sums up the trade relationship between South Korea and Houston. The two exchanged $3.3 billion in goods in 2005, almost evenly split between exports and imports.

Houston exports to South Korea fell nearly 14 percent last year to total $1.62 billion while imports from the Asian nation rose 17.5 percent to $1.65 billion, leaving the total trade tally almost unchanged from a year earlier.

South Korea was one of Houston’s top trading partners, jumping three spots to the No. 12 position in 2005, but their bilateral trade was just a fraction of the overall $72 billion in goods exchanged by South Korea and the United States as a whole last year.

The Korean Trade Center in Texas said imports were on the rise because South Korea’s economy has recovered from the financial crisis of the 1990s. In recent years, Korea has expanded its economy an average of 5 percent annually while its average annual trade figures have gained 12.5 percent.

In 2005, most goods entering Houston’s ports from South Korea were energy-related. Cyclic hydrocarbons nearly doubled, jumping to almost $308 million from just under $155 million in 2004. Imports of gasoline and other refined petroleum products also rose. They closed the year worth nearly $176 million, for an impressive 140 percent increase.

Houston also received nearly $93 million in Korean petrochemicals from cities like Ulsan and Kyungsang. Benzene was $88.5 million of the total. Benzene is used in the production of plastics, resins, nylon, rubber, lubricants, dyes, detergents, drugs and pesticides.

Not all the imports saw gains. Shipments of floating and submersible docks for oil platforms fell 50 percent to close the year at $249 million. Korean shipyards are meeting some of the local demand. South Korea has a vibrant ship-building sector and is home to Daewoo Shipyard, Hyundai Shipyard and Samsung Heavy Industries.

Beyond energy, South Korea played a role in the Houston construction boom, providing more than $45 million-worth of cement, a gain of nearly 43 percent.

Imports of transformers and power supplies were also up – by an impressive 180 percent to total almost $25 million – likely in response to outages caused by Hurricane Rita in September 2005.

On the export side, however, there were declines among the Top 4 commodities. Petrochemicals such as styrene and para-xylene were Houston’s most valuable export but they fell 22 percent in value to total less than $480 million. Man-made chemical acrylonitrile, meanwhile, dropped 39 percent. Houston exported $292.5 million-worth of the chemical, which is used to make plastics, synthetic rubber and acrylic fibers.

Some $87 million-worth of oils derived from coal tar – such as xylene and toluene – was also shipped from Houston, but that was a drop of nearly 36 percent compared with the year before. Xylene is one the top 30 chemicals produced in the United States, as measured by volume. It is used in the rubber, leather and printing industries as well as for a cleaning agent.

Officials at the Korean Trade Center predict trade will grow more robustly if a United States-Korea Free Trade Agreement goes into effect in 2007. In February, then-U.S. Trade Representative Robert Portman announced plans for the trade pact with the United States’ seventh most important trading partner.

In Texas in particular, this year’s exports could be boosted by the lifting of a two-year ban on U.S. beef. The ban went into effect after two cases of bovine spongiform encephalopathy – or mad cow disease – were discovered in December 2003. Before the ban, South Korea was the world’s third biggest buyer of U.S. beef after Japan and Mexico.