'Logistics Crisis and Semiconductor Supply Shortage' Cloud Korea Tire's Earnings Amid Strike

[Asia Economy Reporter Ki-min Lee] This year, Korea Tire & Technology, which was affected by the logistics crisis and semiconductor supply shortage leading to a decrease in vehicle production, has now encountered the obstacle of a partial strike.

On the 21st, according to financial information company FnGuide and the industry, the securities industry forecasted that Korea Tire's fourth-quarter sales would increase by 5.44% to 1.8629 trillion KRW, while operating profit would decrease by 15.22% to 192.8 billion KRW.

This is due to reduced demand for tires for new domestic and overseas vehicles caused by the shortage of vehicle semiconductors. Vehicle semiconductors are difficult to produce in the short term and have low profitability, so the supply shortage is expected to continue until next year.

Moreover, with the shortage of urea solution and magnesium, there is a possibility that major European manufacturers and other global automakers may halt production, which could worsen tire supply issues.

Another problem is that high shipping freight rates have not fallen to previous levels. The Shanghai Containerized Freight Index (SCFI), an indicator of shipping freight rates, recorded an all-time high of 4,647.6 per 20ft container on the 8th of last month and dropped to 4,555.21 on the 19th of this month. However, compared to 890.37 in the second quarter of last year (as of April 3), it has risen more than fivefold, still posing a burden.

In particular, tires are known to be more difficult to find containers for because, unlike other products, they are bulky and thus shippers tend to avoid them.

Jung Yong-jin, a researcher at Shinhan Financial Investment, stated in a recent report, "The increase in freight rates has lowered operating profit margins by 3 to 4 percentage points, and freight rates are expected to remain high until next year."

With no signs of resolution to external circumstances, concerns are emerging in the industry that Korea Tire's performance could worsen beyond forecasts due to the internal adverse factor of a union strike.

Earlier, the Korea Tire union began a two-hour partial strike on the 16th and from 6 a.m. on the 19th until 6 a.m. on the 24th, they are conducting a partial strike of four hours before the end of each shift at the Daejeon and Geumsan plants.

The Korea Tire union chose to strike unusually after failing to reach an agreement in the 'wage collective bargaining' with management since August. The union has announced an indefinite full strike starting at 6 a.m. on the 24th, raising the possibility of a prolonged production halt at domestic plants.

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