Lee Kwan-sup, Vice Chairman of Korea International Trade Association speaks during a press conference held on delivering South Korean businesses’ situation over unionized cargo truckers’ nationwide strike that began last week. (KITA)
The unionized cargo truckers’ continued strike is putting South Korea’s trade competitiveness at risk, business representatives said Tuesday, stressing that not only big companies, but also small firms, would face a bigger burden.
“Followed by auto chip shortages and global shipping issues over the Russia-Ukraine war, the price of raw materials has already soared to the top level,” said Yoon Kyung-sun from the Korea Automobile Manufacturers Association at a press conference held jointly with the Korea International Trade Association. “It is nothing strange to see SMEs going bankrupt if the current situation doesn’t resolve.”
According to KITA, a total of 160 complaints have been filed to them as of Tuesday since the strike. Of them, 65 percent, or 105 reports, were about issues such as delivery delays to clients.
“So far, we have yet to receive any reports on worries of bankruptcy, but it is possible that the latest strike’s damage to the supply chain could be detrimental to SMEs,” said Lee Kwan-sup, vice chairman at KITA. KITA represents some 70,000 Korean export-import firms.
According to the steelmaking, petrochemical and cement industries, the 24-hour operation systems at the Naphtha Cracking Center (NCC) blast furnace and kilns could be suspended if the strike drags on.
“NCCs need to run 24/7 for production. But once they stop, it not only requires a lot of time and money to reactivate, but also faces various risks such as explosion,” said Kim Pyung-joong, head of the Korea Petrochemical Industry Association.
“Considering that 60 percent of petrochemical products are exported overseas to regular customers, a failure to deliver supply with a timely production will let other competitors take the order and weaken Korean firms’ competitiveness in the overseas market in the long term,” Kim added.
Average daily shipments of about 74,000 metric tons of petrochemical products have been slashed by 90 percent since the strike, official industry data showed.
Representatives from the cement industry echoed a similar view.
“Several cement kilns have already stopped, and it requires at least a week’s time and up to 300 million won ($233,000) to restart their operations. It is impossible for manufacturers to just stack cement powder up in open space,” said Kim Young-min, an association representative of the country’s eight cement firms.
The cement industry is estimated to have suffered a daily revenue loss of about 15 billion won since the strike began last Tuesday.
On the truckers’ demand to extend the Safe Trucking Freight Rates System, which guarantees minimum cargo rates for truck drivers and is aimed at preventing dangerous driving, KITA suggested they negotiate with the government with objective logic and data.
The interim system was introduced in 2020 for a three-year run. Drivers say that without the higher rate, they feel under pressure to drive dangerously fast and load more cargo to make ends meet.
Under the system, truckers receive 10 percent extra charge per ton when they load over 22 tons of cargo. When loading harmful chemical substances, truckers can receive 30 percent extra of the distance rate. KITA said there is no clear reasoning behind such extra charge standards.
“Especially after the coronavirus has paralyzed many aspects of the cargo delivery landscape, it is also hard to find out if the system had run effectively over the past years,” said Lee Kwan-sup from KITA.
“By reviewing other countries’ cases where authorities directly check the drivers’ history of distances and time for rest, it is more reasonable to adopt a realistic program that can guarantee the safety of truck drivers based on the structure of the transportation business, rather than just talking about profits.”
By Kim Da-sol (email@example.com