61.2% of Export-Import SMEs "Facing Difficulties Due to Logistics Issues... Need to Expand Freight Support"

[Asia Economy Reporter Donghyun Choi] More than six out of ten small and medium-sized enterprises (SMEs) are experiencing difficulties due to export-import logistics issues.

On the 21st, the Korea Federation of SMEs conducted the "2022 Second Half SME Export Outlook and Export-Import SME Logistics Difficulty Survey" from the 7th to the 13th targeting 508 export-import SMEs. The results showed that 61.2% of companies were facing difficulties due to logistics problems. Their main difficulties were ▲increased freight rates (75.9%), followed by ▲shipment delays (58.5%), ▲lack of shipping space (22.5%), ▲container shortages (20.9%), ▲increased cargo storage costs (14.5%), and ▲lack of storage facilities such as warehouses (8.7%).

The proportion of logistics freight costs in SMEs' export amounts averaged 9.3%, and in import amounts averaged 9.7%, indicating that the burden of freight costs remains high. The impact of rising logistics costs on operating profit was reported as ▲less than 5% decrease (39.8%), ▲5% to less than 10% decrease (23.8%), ▲10% to less than 15% decrease (16.5%), ▲15% to less than 20% decrease (9.8%), and ▲20% or more decrease (9.1%).

Regarding shipping routes perceived as having severe logistics issues, the order was ▲America (West Coast) (27.6%), ▲Europe (24.6%), ▲Southeast Asia (23.8%), ▲America (East Coast) (17.3%), and ▲Northeast Asia & Far East Russia (13.0%).

When asked about the expected duration of the ongoing shipping logistics difficulties, the most common response was ▲until the first half of 2023 (40.4%), followed by ▲the second half of 2023 (24.2%), ▲the second half of 2022 (22.6%), and ▲after 2024 (12.8%). This reflects increased logistics uncertainty compared to a survey conducted in November last year, where 57.6% of companies expected the logistics difficulties to last until the second half of 2022.

To overcome logistics difficulties, companies responded in order of ▲participation in government support measures (39.2%), ▲postponement of shipment dates and adjustment of buyer delivery periods (31.5%), ▲change of terms (FOB↔CIF) (18.7%), and ▲expansion of domestic sales proportion (13.6%). However, a significant number of companies (22.2%) answered that they had no countermeasures, indicating that logistics support measures are still urgently needed.

Regarding policies desired from the government to resolve export-import logistics difficulties, the responses were ▲expansion of freight support (61.6%), ▲increase in shipping space (34.3%), ▲securing containers (26.2%), ▲provision of platforms for booking shipping space (15.6%), and ▲provision of cargo storage locations (14.6%).

Additionally, one in four SMEs (25.6%) viewed the export outlook for the second half of the year as "bad." Compared to the "2022 SME Export Outlook" survey conducted in November last year, the "bad" response increased by 20.4 percentage points from 5.2% to 25.6%. The "good" response decreased by 19.3 percentage points from 40.4% to 21.1%, showing that export SMEs have a negative view of the economic outlook for the second half due to expanded external risks.

The export risks perceived by companies were ▲rising raw material prices (72.2%), ▲logistics difficulties such as lack of shipping space and containers (44.3%), ▲lockdowns in Chinese cities (20.3%), ▲exchange rate fluctuations (18.3%), and ▲parts supply disruptions (16.7%). In particular, 53.7% of SMEs reported being affected by the lockdowns in Chinese cities. The types of damage included ▲delivery schedule delays (44.3%), ▲decreased sales and exports within China (40.9%), ▲inability to procure raw materials (34.0%), and ▲suspension of local factory operations (21.7%).

For the continuous expansion of SME exports, the government’s key tasks should be ▲securing ships and providing freight subsidies (54.5%), ▲expanding support for export marketing such as overseas exhibitions (54.1%), ▲diversifying and stabilizing raw material supply sources (30.7%), ▲strengthening export finance support (22.6%), and ▲activating digital trade (8.3%).

Jumoon Gap Choo, Director of Economic Policy at the Korea Federation of SMEs, said, "Although Korea’s exports in May set a record high, external risk factors are increasing as the trade balance recorded a deficit due to sustained high raw material prices," adding, "This is a time when active government support is needed, including logistics freight support, environmental improvements, and expanded export marketing support."

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