Korean manufacturers grow wary as global tensions cloud export outlook

Automobiles slated for export are lined up at Pyeongtaek Port in Gyeonggi Province, Friday. Yonhap

Korean manufacturers are growing more cautious about the months ahead, as rising geopolitical tensions and uncertainty in export markets weigh on business sentiment, even as the semiconductor sector remains relatively strong, the Korea Chamber of Commerce and Industry said Wednesday.

The group said its business survey index for the manufacturing sector stood at 76 in the second quarter, one point lower than the previous three months.

The survey, conducted among 2,271 manufacturers nationwide from March 5 to 18, showed a widening gap between export-driven firms and those focused on domestic demand. The index for domestic-oriented companies rose to 78, up four points, while that for export-oriented firms fell to 70, down 20 points amid mounting external risks, including tensions in the Middle East.

A reading above 100 indicates that more companies expect conditions to improve from the previous quarter, while a reading below 100 signals the opposite.

Among sectors, semiconductors posted a strong outlook at 118, marking a second consecutive quarter of positive sentiment, driven by expanding global investment in artificial intelligence infrastructure. Cosmetics also remained above the baseline at 103, though the figure fell 18 points from the previous quarter.

In contrast, oil refining and petrochemicals posted 56, the weakest reading among surveyed industries, as concerns grew over potential raw material supply disruptions linked to tensions in the Middle East. The steel sector also remained subdued at 64.

Companies cited rising costs as the most pressing risk to first-half earnings performance, with 70.2 percent pointing to increases in raw material and energy prices. Geopolitical risks such as war followed at 29.8 percent, along with exchange rate volatility at 27.6 percent, slowing private consumption recovery at 19.1 percent and weakening export demand at 13.9 percent.

Despite the uncertainties, 61.1 percent of the surveyed firms said their investment plans for the first half were proceeding as scheduled, while 3.8 percent said investments had expanded. Still, 35.1 percent reported that investments had been reduced or delayed.

Among those scaling back or postponing investments, 26.9 percent cited worsening market conditions as the primary reason, followed by rising production costs at 24.4 percent, changes in trade conditions at 23.9 percent and tightening financing conditions at 19.9 percent.

This article was published with the assistance of generative AI and edited by The Korea Times.