9 out of 10 Small and Medium Manufacturing Companies "Suffer Management Impact Due to Raw Material Price Increases"

IBK Economic Research Institute Survey on the Impact of COVID-19 Recovery and Rising Raw Material Prices on Small and Medium Manufacturing Enterprises

[Asia Economy Reporter Park Sun-mi] A survey found that 9 out of 10 domestic small and medium-sized manufacturing enterprises are affected by rising raw material prices. The upward trend in raw material prices is expected to continue until the second half of next year.

According to the survey results on business recovery after COVID-19 and the impact of rising raw material prices, announced on the 5th by the IBK Economic Research Institute under IBK Industrial Bank of Korea, 89.8% of the surveyed companies reported being affected by the increase in raw material prices. The most common starting period of the impact was "from the second half of last year" (37.2%), followed by "from January this year" (27.5%) and "from the first half of last year" (18.5%).

Additionally, 28.0% of companies said they were unable to reflect the rise in raw material prices in their selling prices, indicating that most small and medium-sized manufacturers in Korea expect a decrease in operating profit due to rising raw material costs to be inevitable.

The largest group of companies (28.7%) anticipated that the rise in raw material prices would continue until the second half of next year. In response, they expressed the need for policy support such as the introduction of cost pass-through systems (32.9%), support for new supply channels for raw materials (21.9%), and guarantees for raw material purchase financing (20.9%). A representative from IBK stated, “We plan to actively strengthen customized financial and non-financial services by industry to help small and medium-sized enterprises overcome the COVID-19 crisis and resolve difficulties caused by rising raw material prices.”

Among the respondents, 56.4% of small and medium-sized enterprises expected to recover to pre-COVID-19 conditions by next year. Internal strategies for business stabilization included cost reduction (55.0%), product innovation (30.2%), and diversification of business partners (30.1%).

External factors expected to influence the business recovery process were identified as rising prices of raw and subsidiary materials (70.9%), resurgence of COVID-19 (23.1%), and increased financial costs (22.1%). Regarding support desired from financial institutions, respondents indicated the need for easing loan conditions such as interest rates (68.5%), liquidity supply (40.4%), and sales channel support (11.7%).

Meanwhile, this survey was conducted through Korea Enterprise Data from May 31 to June 16, targeting 1,000 small and medium-sized manufacturing enterprises with fewer than 300 employees.

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