7 out of 10 Export-Import SMEs Face Logistics Difficulties Due to Rising Shipping Costs and More

Rising Logistics Costs Challenge Export-Import SMEs... Shortage of Shipping Space and Containers
60.5% Report "Reduced Operating Profit Due to Logistics Difficulties"... Decline in Price Competitiveness
Last Month, Eastbound Transpacific Freight Rates Up 114.9% YoY
"Support for Freight Rates and Shipping Space Securing Must Be Expanded"

[Image source=Yonhap News]

[Asia Economy Reporter Lee Junhyung] More than 7 out of 10 (73.4%) small and medium-sized enterprises (SMEs) engaged in export and import reported experiencing logistics difficulties due to recent increases in the Shanghai Containerized Freight Index (SCFI) and other factors.

The Korea Federation of SMEs announced on the 17th that a survey on the logistics difficulties of export-import SMEs was conducted from the 2nd to the 11th of this month, targeting 519 export-import SMEs. This survey was conducted to assess the impact of recent sharp increases in shipping freight rates and container shortages on export-import SMEs.

Major logistics difficulties of small and medium-sized enterprises in import and export.
[Photo by Korea Federation of SMEs]

The main logistics difficulties faced by export-import SMEs were 'rising shipping freight rates' (65.4%), which was the most frequently cited issue. This was followed by ▲increased air freight rates (50.7%) ▲container space shortages (33.1%) ▲container shortages (24.7%) ▲lack of cargo flights (17.8%).

Regarding difficulties caused by logistics issues, 'decreased operating profit' (60.5%) was the most common. This was followed by ▲reduced product price competitiveness (48.9%) ▲decrease in overseas clients due to rising freight rates (25.2%) ▲increased inventory and cargo storage costs (21.2%). Among SMEs experiencing logistics difficulties, 10.2% reported contract cancellations.

Concerning the decrease in operating profit, 26% of export-import SMEs responded that the impact of rising logistics freight rates on operating profit margin decline exceeded 10%. 'Decline between over 5% and up to 10%' accounted for 27.7%, and 'decline of 5% or less' applied to 46.2% of companies surveyed.

According to the survey, the average proportion of logistics freight costs in SMEs' export value was 6.8%. The average proportion of logistics freight costs in import value was 8%.

A route where the logistics situation feels severe.
[Photo by Jungso Company Association]

Among export-import SMEs, 4 out of 10 (36.9%) reported that logistics conditions on routes to the Americas were severe. This was followed by ▲Europe (31.2%) ▲Northeast Asia including China and Japan (30.3%) ▲Southeast Asia (24.3%).

In fact, freight rates on the East Coast of the Americas increased by 114.9% last month compared to May of the previous year. During the same period, rates on European routes rose by 95.4%, and those on the West Coast of the Americas increased by 88.5%.

The most desired government support measure by SMEs was 'expanded freight rate support' at 58%. This was followed by ▲expanded support for securing container space (17.5%) ▲support for container procurement (10.2%) ▲operation of cargo charter flights (7.3%).

Choo Moon-gap, Head of the Economic Policy Division at the Korea Federation of SMEs, said, "Although the government has been implementing policies to resolve export-import logistics difficulties since the second half of last year, the logistics challenges felt by SMEs remain significant," adding, "Active support is necessary so that export-import SMEs can lead the economic recovery."

This content was produced with the assistance of AI translation services.