75% of Root and Construction SMEs Report "Severe Business Deterioration"... Demand for Delivery Price Linkage System and Win-Win Committee

Raw Material Prices Rise 51.2% in 2 Years
Challenges Due to Unreflected Price Increases in Delivery Costs
Press Conference for Fair Pricing to Be Held on the 11th

[Image source=Yonhap News]

Prices of raw materials purchased by small and medium-sized enterprises (SMEs) in the root and construction sectors for product manufacturing have risen by 51.2% over the past two years. Despite this, only 4.6% of SMEs reported that the increase in raw material prices was ‘fully reflected’ in their delivery prices, while 49.2% responded that it was ‘not reflected at all,’ indicating that the difficulties faced by SMEs have reached a peak.

According to a survey conducted last month by the Korea Federation of SMEs targeting about 300 SMEs in the root and construction sectors, raw material prices increased by an average of 51.2% compared to 2020. For the root industry, prices rose by 68.6%, and for the construction industry, by 41.6%.

During the same period, 75.2% of respondents reported that their business conditions had ‘deteriorated significantly’ due to the sharp rise in raw material prices. Including those who said conditions had ‘somewhat worsened,’ nearly all (99.4%) root and construction SMEs experienced worsening business conditions. Even when partial reflection of price increases was allowed in delivery payments, the reflection rate was only 29.9% of the total increase. SMEs responded that if this situation continues, they plan to cope by reducing production volume (41.9%), cutting jobs (32.9%), and closing factories (9.6%).

On the 11th, 18 SME organizations, including the Korea Federation of SMEs, held a press conference at the Federation’s office in Yeouido, Seoul, to announce the survey results and urged the new government to address the polarization between large and small-medium enterprises. In particular, SME groups called for the establishment of a presidential-level Win-Win Committee to resolve these issues.

Kim Ki-moon, Chairman of the Korea Federation of SMEs / Photo by Hyunmin Kim kimhyun81@

Kim Ki-moon, chairman of the Korea Federation of SMEs, emphasized, "A legally mandated delivery price linkage system must be introduced promptly until a culture of voluntary coexistence is established," and added, "The new government should establish a presidential-level Win-Win Committee to promote coexistence and cooperation between large and small-medium enterprises and serve as a control tower to review and coordinate SME policies."

On the same day, field damage cases of delivery price non-reflection by SMEs were also presented. Yoo Byung-jo, chairman of the Korea Window and Curtain Wall Association, said, "The contract period with construction companies is 1 to 3 years, but the price of aluminum, the main material for window and curtain wall frames, has doubled, causing enormous losses," and called for countermeasures. Bae Jo-ung, chairman of the Korea Ready-Mixed Concrete Industry Federation, lamented, "With rapid increases in material costs such as cement and aggregates, fuel costs, and transportation fees, the small ready-mixed concrete industry is caught between purchasing construction companies and is facing the worst situation," adding, "Large cement companies are demanding an additional 19% price increase citing the rise in bituminous coal prices and are even exerting pressure to stop supply."

Jung Han-sung, director of the Korea Fastener Industry Cooperative, stated, "While large raw material suppliers have recorded record-high operating profits, the operating profit margin of SMEs in the fastener industry is only 1%," and stressed, "To promote coexistence, communication with SME organizations by industry must be strengthened."

The press conference was attended by organizations including the Korea Women Entrepreneurs Association, the Korea Specialty Contractors Association, the Korea Mechanical Equipment Construction Association, the Korea Window and Curtain Wall Association, and the National Reinforced Concrete Federation.

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