South Korea Container Shortage Exporters Stumped

Busan, South Korea - Lee Sang Hoon, unable to find space on a container ship, is considering using fishing trawlers moored for repairs in the South Korean port of Busan to meet growing export orders for motor oil for cars he sells to Russia. “China is a black hole in this shipping crisis - all carriers are heading there,” said Li, owner of Dongkwang International Co. in Busan. The firm's annual revenue is approximately 20 billion won ($ 17.60 million). “These fishing boats can be our answer because we are already a month behind schedule. That is, if we can solve the packaging problems, ”Lee said, pointing to empty fishing trawlers visible from his Busan office. Trawler reservations are one way that businesses in the world's seventh largest exporting country are trying to overcome critical bottlenecks caused by the pandemic, in particular the shortage of shipping containers. Thousands of exporters like Dongkwang are struggling to move their goods through Busan, the 7th busiest container port in the world, where terminals handle over 59,000 containers daily to handle about 75% of all traffic in the country. While global carriers strive to deliver everything from furniture to toys to consumers in the US and Europe, they are opting for much larger shipments awaiting delivery along a Chinese factory rather than Busan. There are fewer vessels left in the South Korean port, and there is a surplus in China, according to cargo managers at Busan terminals. “Since many (ships) leave China, where factories are mostly operating, there is little space left on the ships by the time they stop in Busan,” said Lee Eun-hyuk, director of marketing at the Busan Port Authority.

Some don't stop at Busan at all. According to the port administration, the number of container ships arriving in Busan fell by almost 10% during May this year. That said, exports were up 23.4% from the previous year, leading to a very uneven recovery for Asia's fourth largest economy. On a real-time map of the world's major ships on a control tower operated by HMM Co., the country's largest container carrier, most of the red and yellow dots show that its alliance's fleet is concentrated near China and Singapore, not South Korea. While the disruption to shipping caused by the pandemic is a global concern, congestion at a transit hub like Busan has worsened the plight of small South Korean exporters. When Yantian, one of China's busiest ports, was partially closed in June to fight viruses, some shipments were diverted to neighboring ports such as Busan, exacerbating delays and intermittent delays. “This is a transit hub with many inputs and outputs. We need to ship 30 containers in 30 days (1 container per day without interruption), but in the end we were able to sell only 70% to 80% of them, ”said Li from Dongkwang International, adding that his company recently increased the cost from - for increased shipping costs. According to Lee, carriers sometimes hesitate to receive shipping orders or force customers to settle for much higher spot rates. The pain and resentment are especially acute on unclaimed routes, which are usually used by smaller firms, which is why tariffs for transportation from Busan to Vladivostok, for example, rise more rapidly than to the west of America. Dongkwang now pays $ 2,200 for a 20-foot equivalent (TEU) route, which is about 6 times more than in 2020. For the more important industrial plants in South Korea (Samsung and LG), delivery difficulties are not so difficult because carriers prioritize customers with “big pockets” who have a significant volume of goods to be shipped.

To help, the government helped fund HMM's orders for additional containers and increased cash disbursements to support affected small and medium-sized exporters. The congestion of the terminal is clearly visible in the New Port of Busan. At one of the five new terminals, outbound containers filled with goods were stacked to their vertical limits. Transit ships with thousands of containers were unloaded by automatic cranes, which, using artificial intelligence, find a place for steel crates. Every 10 seconds, a truck with a 20 'or 40' container drives through the gates, delivering them to warehouses that already seem to be cracked at the seams. “When a port closure or other overrun occurs, it doesn't just mean bypassing ships, it leads to a huge accumulation of cargo that the ships had to take for export,” said one field officer, looking at the Metal Mountains in the port. At the level of the current situation in the retail trade, many manufacturers either reduce the volume of the product produced (the same sodium metabisulfite), or increase the cost. And sometimes both.

In June, the largest tire manufacturer in South Korea
Hankook Tire & TechnologyCo announced that it is freezing operations at key plants for 3 days due to lack of transportation space.

“We plan to raise prices by about 3-5% in Germany and other European countries in July, and something similar is under consideration for the US market in August,” said a spokesman for Hankook.

The bottleneck also affected Korean consumers, with fast food chain Lotteria replacing french fries with cheese sticks due to problems with potato delivery.

The squeeze has resulted in some winners: HMM shares have jumped twelve-fold since early 2020 and further gains are expected.

“The global volume of containers is increasing. The most demanded quarter is in the third part. But as exporters are struggling, we predict that the trend will continue until the fourth quarter, ”said an HMM spokesman.