70% of Export Companies Say "Rising Logistics Costs Will Ease Only After June Next Year"

[Asia Economy Reporter Su-yeon Woo] Amid the prolonged logistics crisis caused by rising shipping freight rates, 70% of export companies expect logistics costs to normalize only after June next year.

On the 15th, the Federation of Korean Industries (FKI) conducted a survey on shipping logistics difficulties targeting the top 1,000 export companies by sales. Among the 150 respondent companies, 70% anticipated the normalization of logistics costs to occur after next year. Specifically, 26% expected normalization by June next year, 27.4% by the end of next year, and 16% after the year following next, while only 7.3% forecasted normalization within this year.

Recently, the types of transportation contracts among export companies have diversified, making them more affected by logistics cost increases. The survey showed 33% had long-term maritime transport contracts, 31.5% short-term maritime transport contracts, 19.2% short-term air transport contracts, and 13.8% long-term air transport contracts.

The FKI explained, "There is a common perception that large export companies are mostly covered by long-term maritime transport contracts and thus less affected by logistics cost increases. However, short-term maritime transport contracts account for one-third of all responses. Additionally, a significant number of air transport contracts, where freight rates have surged recently, also exist, indicating that the impact on logistics costs is greater than expected."

Response/Data on the timing of normalization of logistics cost increase = Federation of Korean Industries

Export companies reported that logistics costs rose by 30.9% in the first half of this year compared to the previous year and are expected to increase by 23.8% in the second half. Considering the sharp rise in shipping freight rates that began in the second half of last year, companies are expected to face substantial logistics cost burdens in the latter half of this year as well.

The main causes of logistics difficulties were identified as the sharp rise in shipping freight rates (26.3%) and transportation delays (25.4%). Responses indicating difficulties in securing vessels (18.6%) were also significant. Due to increased logistics costs, companies experienced challenges such as decreased operating profits (38.9%) and increased costs related to delays (36.2%). Additionally, 2.7% of respondent companies reported difficulties due to severed business relationships.

The impact of the surge in logistics costs is a burden companies have no choice but to bear. Company-borne costs accounted for 58.5%, exceeding half of the respondents, while only 25.5% of companies passed on the costs by reflecting them in product prices. Some companies coped by reducing costs (8.5%) or using alternative logistics such as air transport (5.9%), and 1.3% of companies even gave up on exports.

Regarding the recent imposition of fines by the Fair Trade Commission on shipping industry price-fixing, companies called for fundamental solutions while expressing concerns about decisions that could worsen the logistics crisis. The highest response (49.3%) was for the need for long-term legal reforms, including adding specific procedures to allow collusion under the Shipping Act, and 22% responded that the fines should be withdrawn.

Regarding government efforts to stabilize logistics, fostering national shipping companies (26.8%) was identified as the most important policy. This was followed by expanding the deployment of temporary vessels (26.4%), strengthening incentives for long-term contracts between shipping companies and cargo owners (12.4%), and supporting container procurement (12.4%). This suggests that export companies affected by the current logistics crisis recognize the need for mid- to long-term strategies for the shipping industry, such as fostering national shipping companies and strengthening relationships between shipping companies and cargo owners.

Yoo Hwan-ik, Director of Corporate Policy at the FKI, emphasized, "Since the increase in logistics costs is likely to continue until next year, in addition to fundamental policies to foster the shipping industry, it is necessary for the government to prepare detailed responses for large export companies facing difficulties such as vessel procurement challenges and severed business relationships."

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