South Korean exports in October fell for an 11th consecutive month and by the most in nearly four years as shipments to China kept slowing and computer chip prices plunged, data showed on Friday.

South Korea, the first major exporting economy to release monthly foreign trade data, has been struggling especially hard from the prolonged US-China trade war on top of already cooling global demand.

Exports dropped for an 11th consecutive month and by 14.7% in October from a year earlier, the data showed, the biggest decline since January 2016 and worse than a 13.8% fall tipped in a Reuters survey.

But the government said the worst may be over. Trade, Industry and Energy Minister Sung Yun-mo said in a statement that the rate of decline would begin narrowing due to solid demand in volume terms and as semiconductor prices fall less sharply.

Economists also have predicted year-on-year comparisons would start to moderate soon due to the calendar effect, unless global demand plunges further. South Korean exports started falling in November last year.

“Average exports per working day remains high and some of the (global) uncertainties are clearing. So, I expect the rate of decline to narrow and it will turn positive early next year,” said Park Sang-hyun, chief economist at Hi Investment & Securities.

Investors largely shrugged off the poor October data while focusing on the latest twists and turns in US-China trade talks and on a positive private business survey on China’s manufacturing sector, also released on Friday. The benchmark stock index KOSPI slightly extended gains, while the won slightly cut losses. Three-year treasury bond futures pared gains.

Leading the poor showing in October were a plunge of 32.1% in semiconductor exports in value as prices tumbled from last year’s super rally and a 16.9% fall in total shipments to China, also down from a boom at that time.

Semiconductors, including memory chips made by global giants Samsung Electronics and SK Hynix, account for 18% of South Korea’s total exports, while China takes in 25% of its neighbour’s global shipments.

The government now expects semiconductor prices to begin improving from late this year on solid demand worldwide.

Park Tae-sung, deputy minister for trade and investment at the ministry, told a news conference that chip exports could recover soon, saying global buyers’ inventories had nearly returned to normal levels and that prices of some memory chips had turned around.

He also said many of the new ship orders received by local companies during a boom in 2017 were due for delivery from early next year. Ships are another major South Korean export.

Imports in October slid 14.6% from a year earlier, more than a predicted 13.2% drop in the Reuters survey.

That brought the October trade balance to a $5.39 billion surplus, versus a $5.98 billion surplus in September.

The trade figures came out shortly after data showed South Korea’s annual consumer price inflation rate stood at zero in October, pulling out of the first deflation on record in September.

Meanwhile, SK Innovation, the owner of South Korea’s top refiner SK Energy, said on Thursday that a recovery in refining margins is expected in the fourth quarter ahead of the implementation of new shipping fuel rules from 2020.

As the International Maritime Organisation (IMO)’s global sulphur cap on marine fuels comes into force from 2020, demand for low-sulphur fuel oil and marine gas oil is expected to pick up, the company said. The IMO’s new shipping fuel mandate will limit the sulphur content of fuels to 0.5%, from 3.5% currently.

“Refining margins are expected to improve led by middle distillates demand as the International Maritime Organisation (IMO)’s shipping fuel rules set to take effect from 2020,” the company said in an earnings statement.

Ahead of the IMO’s stricter marine fuel regulation, Kim Ji-yong, a senior official at SK Energy, said in a call with analysts that the company is in talks with shippers about long-term contracts to supply low-sulphur fuel oil or marine gas oil.

Kim added that the company’s vacuum residue desulfurisation unit (VRDS), which can produce 40,000 barrels per day (bpd) of low-sulphur fuel oil, would start commercial operations in March or April next year.

A week ago, S-Oil, South Korea’s third-biggest refiner, also said inventory build-up ahead of the IMO 2020 and seasonal demand for heating were expected to help refining margins increase in the fourth quarter.

Reuters