"Logistics Crisis to Continue Next Year" Export-Import Companies Face Deepening Worries

KCCI Survey of 300 Export-Import Companies
9 out of 10 Say "Logistics Costs Will Remain a Burden Next Year"

Containers piled up at Busan Port Sinsundae Pier

[Asia Economy Reporter Choi Dae-yeol] Company A, which exports electric vehicle parts, expects its export volume to increase by about 20% next year but remains deeply concerned. The logistics cost burden has already risen significantly this year, and there are no signs of relief next year. Beyond just rising freight rates, the ongoing uncertainty is making it difficult to plan next year’s business strategy. A company official said, "It is hard to estimate how much logistics costs should be reflected in export unit prices."

A survey revealed that volatility in the international transportation and logistics market since COVID-19 has increased the burden on domestic import-export companies. According to the results released on the 12th by the Korea Chamber of Commerce and Industry, which surveyed 300 import-export companies about logistics outlook for next year, about 48% expected logistics costs to remain similar to this year. Meanwhile, 43% anticipated an increase compared to this year, and only 9% expected a decrease.

The logistics cost burden has significantly increased this year. The Shanghai Containerized Freight Index rose from around 850 in April last year to about 4560 last month, more than fivefold. Due to COVID-19, small and medium-sized logistics companies in ports and inland transportation have downsized or disappeared, causing the logistics system to fail to stabilize despite the global economic recovery this year, resulting in severe logistics difficulties. A chamber official said, "If congestion worsens at overseas ports or inland areas due to the spread of the Omicron variant, the freight index could rise again."

Nine out of ten companies expect the logistics system to normalize only after the second half of next year. Some (6%) even expect normalization after the year following next. Only about 9% believe conditions will improve in the first half of next year. If import-export logistics costs continue to rise steadily, companies face reduced operating profits or weakened product price competitiveness, leading to difficulties. Overseas clients may decrease, and storage costs may increase.

Regarding whether companies have established plans to respond to logistics difficulties, 39% answered that they have already established or are establishing such plans, while the remaining 61% have not yet done so. The biggest reason for not preparing logistics response plans was market uncertainty, cited by half of the respondents. About 40% of all surveyed companies said that the government needs to support logistics costs such as freight or increase financial support to resolve import-export companies’ logistics difficulties.

Professor Song Sang-hwa of the Graduate School of Northeast Asian Logistics at Incheon National University said, "Unlike previous economic crises, the current logistics crisis is caused by simultaneous uncertainties in both demand and supply, creating unprecedented difficulties. However, issues on the supply side, such as increased shipping capacity and reduced port handling waiting times, are gradually being resolved, so bottlenecks are expected to ease from the first half of next year, with logistics normalizing by the second half."

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