"Raw Material Prices Up 40% After War"...756 Cases of SME Damages Reported Due to Middle East Conflict

Growth Slows
23 More Cases Reported Compared to Previous Week

The ongoing war between the United States, Israel, and Iran continues to impact Korean small and medium-sized export companies.

According to the Ministry of SMEs and Startups on May 6, as of 12:00 p.m. that day, a total of 756 cases of damages and difficulties (including concerns) related to the Middle East situation had been reported by small and medium-sized enterprises. This is an increase of 23 cases compared to the previous week. Since February 28, the Ministry has been accepting online reports via its website and handling phone and in-person reports through 15 regional export support centers.

Of the cases received, 569 involved damages and difficulties, while 117 were concerns. Looking at the types of damages and difficulties (multiple responses allowed), transportation disruptions accounted for the largest share at 262 cases (46.0%). This was followed by increased logistics costs with 206 cases (36.2%), order cancellations or postponements with 191 cases (33.6%), others at 186 cases (32.7%), business trip disruptions with 102 cases (17.9%), and payment delays with 87 cases (15.3%). Among the concerns (multiple responses allowed), transportation disruptions were also the most common, with 79 cases (67.5%), followed by others at 39 cases (33.3%) and loss of contact at 8 cases (6.8%).

By country, the largest number of reported damages and difficulties came from other Middle Eastern countries such as the United Arab Emirates and Saudi Arabia, with 441 cases, rather than Iran or Israel. Iran accounted for 93 cases and Israel for 87 cases, remaining the same as the previous week. There were also 203 cases reported from countries outside the Middle East.

Key examples of damages include a company whose raw material prices have risen by an average of 40% since the war, worsening profitability. The company currently only has about one month's worth of raw material inventory, raising concerns that any supply disruptions could impact its production schedule in the second half of the year. Another company incurred additional costs due to rising transportation fees and detour shipping caused by the blockade of straits. Transportation costs increased by more than 25% compared to before, and the shipping period extended from 40 days to over 60 days.

Another small and medium-sized enterprise saw its exports come to a complete halt due to order cancellations and the suspension of orders from Middle Eastern buyers. The company also struggled to find alternative markets, resulting in disruptions to normal operations and production activities. In some cases, follow-up meetings with buyers from four companies in the UAE were canceled and sales and marketing activities in the local market were suspended due to the war.

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