With global oil prices tanking, South Korea’s exports and its key industries are projected to face more hurdles, according to market watchers Tuesday. 

The price of US crude oil plummeted from $18 a barrel to minus $38 within hours early Tuesday, as oil producers ran out of space to store the oversupply created by the ongoing pandemic. It rebounded into positive territory, above $1, around noon, but onlookers expect risks to linger for the time being.

This has been spurring concerns about Asia’s fourth-largest economy, which relies heavily on exports. Low oil prices often translate into a decline in export unit value, which results in an overall drop in exports, despite sufficient volumes.

Korea’s exports were already struggling under the weight of the COVID-19 crisis, according to financial authorities, pointing to a decline in exports of petrochemicals and petroleum products.

Its outbound shipments slipped 26.9 percent on-year to $21.7 billion from April 1 to Monday, data from the Korea Customs Service showed Monday. Exports of petroleum products declined by 53.5 percent while autos and auto parts slipped 28.5 percent and 49.8 percent, respectively, in the cited period.

Overall demand from both China and the US has dropped by around 17 percent.

In separate data released last week, the central bank cited cuts in prices of coal, petroleum and chemical products as factors behind a decline in on-month export prices in March. The figure marked a 10th consecutive month of decline on-year as well, according to the Bank of Korea.

The nation’s oil refiners are expected to deal with the most direct blow from the oil price plunge as analysts expect major refiners, including SK Innovation and S-Oil, to go into the red this quarter. They will remain in negative terrain in the second quarter, analysts added.

Construction companies are projected to face setbacks in meeting their annual overseas order targets for this year, with low oil prices affecting construction orders from the Middle East. The industry has been under strain in the past few years, due to a continued plunge in oil prices and increased global competition.

“Due to the COVID-19 crisis, a delay or cancellation of overseas construction orders is expected,” said Park Sun-gu, a researcher from the Korea Research Institute for Construction Policy.

“The demand from the Middle East, which is a key market, is projected to contract as well and while the overseas construction projects have been doing fairly well, they are expected to shrink after the second quarter due to the COVID-19 risks and plummeting oil prices,” he added.

The shipbuilding industry sees similar risks with a likely decline in demand for offshore drilling and a delay in the liquefied natural gas transportation orders placed by Qatar and Mozambique.

According to gas price information provider Opinet, gas stations across the country offered an average price of 1,113.7 won (91 cents) per liter, as of 9 a.m. The price fell by 3.6 percent from the previous day and plummeted nearly 20 percent from the beginning of the year. It is projected to decline further, experts said.

By Jung Min-kyung (mkjung@heraldcorp.com)