"Up to now, exports have been the only way to escape from the economic crisis for our metal industry," said Yoon Young-mok, an analyst with Daewoo Economic Research Institute.

"But this is endangered by the won's recent recovery."

Yoon said the deteriorating real economy has resulted in slashed metal imports and output by cable makers, brass mills, fabricators, rolling mills and extrusion makers.

But he said local refined metal producers would continue shipping their metal output overseas, especially to the London Metal Exchange (LME), to offset slumping domestic demand.

"Unlike metal fabricators, local refined metal producers can ship their production to the LME at any time if there is no demand on the domestic market," Yoon said. The won has gained 50 per cent against the dollar in less than seven months, but thecurrency's fast recovery could damage already dwindling export earnings, traders said.

The won gained as imports plunged in line with shrinking consumption and investment, but the pace was most likely to slow as export earnings have fallen steeply, they said.

The won was trading at 1,315 to the dollar at 0600 GMT on Friday after hitting a yearly high of 1,307 on Thursday, up 52.6 percent from its record low of 1,995 on December 23. The renewed weakness of the Japanese yen would also cast dark clouds over the local industry's efforts to boost exports, Yoon of Daewoo said. The weak yen could put renewed pressure on China to devalue its currency, which could dampen demand for Korean metal in one of the country's big markets, he said. But a trader with LG Metals Corp said the won's recovery may help boost local demand for copper cathode as copper scrap prices did not appear to be attractive. Nosediving LME copper prices, which hit an 11-year low on Thursday, together with the won's recovery, has made coppercathode prices more attractive than those of scrap, he said.

LG Metals said earlier this week its copper cathode exports surged to 66,250 tonnes in the first half of 1998 from 2,600 tonnes a year earlier, but its copper cathode sales on the domestic market fell 24 percent to 94,339 tonne. LG Metals, the country's only copper producer, has a 350,000-tonne capacity smelter and a 420,000-tonne capacity refinery. Its major markets are China and Taiwan. Meanwhile, South Korea's refined zinc exports were expected to surge to 160,000 tonnes in 1998 from 88,600 tonnes in 1997, Kim Jae-sun, general manager of Korea Zinc Co Ltd, said on Wednesday. The country's zinc exports surged to 82,000 tonnes in the first half of 1998 from 20,000 tonnes in the same period a year ago. But domestic sales fell 19 percent to 110,000 tonnes, after the Financial crisis slashed demand, Kim said.

Kim said South Korean zinc producers have increased shipments to the United States and Europe, which consumed only a small portion of SouthKorean exports.