KOIMA Index Renews Record for 10th Straight Month

The KOIMA index, the raw materials import price index evaluated by the Korea Importers Association, renewed its record high for the 10th straight month.

After falling more than five dollars per barrel in the week, the international oil price reversed to begin surging on the back of the rising price of oil futures.

KOIMA announced yesterday that the index jumped 28.49 points in June, up from 425.06 in May.

The KOIMA index (100=December 1995) is calculated via monthly analysis of 30 major raw material import prices based on the prices posted in December 1995.

By item, bituminous coal showed the sharpest increase by jumping a whopping 206.12 percent from May. It was followed by pig iron (85.26 percent), scrap iron (67.82 percent), iron ore (62.75 percent) and oil (47.35 percent). Among the 30 items, 17 items showed double-digit growth.

After beginning its upward movement in September 2007, the KOIMA index has continued to set a new high every month.

Future prices of West Texas Intermediate and Brent Crude Oil also skyrocketed.

According to the Korea National Oil Corporation, the WTI crude oil futures price on the New York Mercantile Exchange (NYMEX) surged 5.60 dollars per barrel to 141.65 dollars and Brent Crude on London’s ICE futures price exchange soared 5.45 dollars per barrel to reach 142.03 dollars, on Thursday.

Korea’s benchmark Dubai crude decreased 1.34 dollars per barrel to 132.81 dollars.

A KNOC official explained, “International oil prices have surged due to worsening geopolitical risks such as Iran’s missile test and resumed activities of militant groups in Nigeria. The spot price of Dubai crude decreased as the news related with developments in Nigeria was reflected in the price one day later.”

In its report entitled “Oil Shock, Cases of Advanced Nations, and Suggestions,” the Korea Institute for Industrial Economics and Trade estimated, “If the international oil prices reach 150 dollars per barrel in the second half, Korea’s industrial production cost would increase 3.77 percent and its GDP growth rate would decrease 0.6 percentage point.”

It added, “If prices of oil and raw materials keep surging, stagflation (inflation amid economic slowdown) may reappear, as it did in the 1980s.”

cha@donga.com