"Shipments Sent in February Still Stuck in Hormuz"... Middle East War Inflicts Ongoing Damage on SMEs for Two Months

"The shipment we sent to Dubai and Saudi Arabia in February still hasn't made it through the Strait of Hormuz," lamented one small business exporter. Amid heightened uncertainty surrounding peace negotiations between the United States and Israel and Iran, the prolonged situation is continuing to inflict growing damage on domestic small and medium-sized exporters. Although the rate of increase has slowed somewhat, the number of cases involving rising logistics costs and canceled contracts has grown, and there has also been an uptick in damages suffered by companies exporting to countries outside the Middle East.

According to the Ministry of SMEs and Startups on April 22, as of noon that day, a total of 677 cases involving damages or difficulties (including concerns) related to the Middle East situation had been reported by small and medium-sized enterprises. This represents an increase of 59 cases compared to the previous week. Since February 28, the Ministry has been accepting online submissions through its website and receiving reports of damages and difficulties via phone and in-person at 15 regional export support centers.

Minister Han Sung-sook of the Ministry of SMEs and Startups is listening to difficulties faced by small and medium enterprises due to the Middle East war during an on-site meeting held at K-Tech in Jinju, Gyeongsangnam-do on the 17th. Ministry of SMEs and Startups

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Among the reported cases, there were 496 classified as damages or difficulties and 113 as concerns. In terms of damages or difficulties (with multiple responses possible), transportation disruptions were the most common, accounting for 245 cases (49.4%). This was followed by rising logistics costs in 178 cases (35.9%), contract cancellations or suspensions in 175 cases (35.3%), other issues in 136 cases (27.4%), business trip disruptions in 95 cases (19.2%), and non-payment in 85 cases (17.1%). As for concerns (with multiple responses possible), transportation disruptions again topped the list with 77 cases (68.1%), followed by other issues in 36 cases (31.9%), and loss of contact in 8 cases (7.1%).

By country, the highest number of reported damages or difficulties came from nations other than Iran and Israel, with 405 cases from other Middle Eastern countries such as the UAE and Saudi Arabia. There were 91 cases reported in Iran and 85 in Israel. Cases involving countries outside the Middle East also increased by 28 from the previous week, reaching 157 in total.

Looking at major examples of damages, one small business saw the price of petrochemical-based subsidiary materials surge three to four times, and due to suppliers refusing orders, all deliveries of raw and subsidiary materials were completely halted. As a result, a delivery scheduled for May has been indefinitely postponed, and plans for new product production have also been disrupted. Another company, whose shipment has not passed through the Strait of Hormuz, faced a significant increase in logistics costs after the shipping company requested an additional $5,000 per shipment.

One small business that had planned to export to Saudi Arabia twice this year saw all its order schedules put on hold due to the war, resulting in operational difficulties even though products had been prepared in advance for export. Another company that had planned a business trip to Kuwait as a follow-up to a contract signing had to cancel the trip entirely. Overseas buyers’ visits to Korea to inspect factories and receive samples were also canceled.

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