6 Minutes to Read Reuters, BUSAN, July 9 – Lee Sang-hoon is considering utilizing fishing trawlers docked for repair in the South Korean port of Busan to meet soaring export demand for the automobile engine oil he sells to Russia since he can’t acquire a spot on a container ship. “China is the black hole in this maritime crisis; all the carriers are heading there,” said Lee, the owner of Dongkwang International Co. in Busan, which has an annual revenue of over 20 billion won ($17.60 million). “Because we’re already one month behind schedule, those fishing boats out there could be the answer. That is, assuming we can resolve the packaging concerns “Lee said this while standing in his Busan office, pointing to empty fishing trawlers. Businesses in the world’s seventh-largest exporting nation are using trawlers to get around major bottlenecks caused by the pandemic, including as a shortage of shipping containers. Thousands of exporters, including Dongkwang, are battling to get their goods through Busan, the world’s seventh busiest container port, whose terminals process over 59,000 containers daily, accounting for around 75 percent of the country’s total shipping. Global carriers prioritize considerably larger batches of cargo waiting to be picked up along China’s manufacturing belt over Busan as they race to deliver anything from furniture to toys to U.S. and European consumers. According to cargo managers at Busan’s terminals, this results in fewer vessels in the Korean port and an oversupply of them in China. “There’s little vessel capacity left by the time they stop in Busan because many (ships) travel from China, where factories are mostly fully operational,” said Lee Eung-hyuk, a marketing director at Busan Port Authority. Some people do not even stop in Busan. According to data from the port administration, the number of inbound container ships in Busan declined about 10% in May this year, despite a 23.4 percent increase in exports from a year earlier, resulting in a very unequal rebound for Asia’s fourth-largest economy. The majority of the red and yellow dots on a real-time map of the world’s key boats inside a control tower operated by HMM Co, the country’s largest container carrier, show its alliance fleet focused around China and Singapore, not Korea. While the pandemic’s shipping constraints are a global issue, congestion at a transit center such as Busan has made things worse for smaller Korean exporters. When one of China’s largest ports, Yantian, was partially shut down in June to deal with virus infections, some cargo was transferred to other ports like Busan, exacerbating the backlogs and causing occasional delays. “It’s a major transit hub with numerous entrances and exits. We need to ship 30 containers per month, but we’ve only been able to obtain approximately 70% to 80% of what we require “rcent of that,” Dongkwang International’s Lee said, adding that his company has lately boosted rates owing to increasing shipping expenses. According to Lee, carriers often refuse to take bookings at all or compel clients to pay substantially higher spot charges. The pain is felt most severely on less-popular routes that smaller enterprises frequently utilize, such as Busan to Vladivostok, where shipping charges are rising faster than, say, the West Coast of the United States. Dongkwang now pays $2,200 per twenty-foot equivalent unit (TEU) for the route, an increase of approximately six times over a year ago. The shipping pressure isn’t as bad for South Korea’s larger industrials, such as Samsung and LG, because carriers prioritize orders from customers with significant pockets and a larger volume of items to send. To help affected small-to-medium exporters, the government has helped finance HMM orders for extra containers and increased cash payments. The terminal congestion at Busan’s New Port is obvious. Outbound containers full of products were packed to their vertical limits at one of the five new ports. Automated cranes, which use artificial intelligence to find room for the steel boxes, were unloading transit vessels carrying thousands of containers. Every ten seconds, a truck carrying a 20-foot or 40-foot container goes through the gate, transporting the containers to warehouses that are already overflowing. “When port closures or other snags occur, it not only means a diversion for vessels; it also means a massive pileup of cargo the ship was supposed to pick up for exports half a world away,” one field officer explained, pointing to the port’s “metal mountains.” Businesses are either reducing output volume or boosting prices, or both, at the retail level. Hankook Tire & Technology Co., South Korea’s largest tire manufacturer, announced in June that it would be suspending operations at key local plants for three days owing to a shipping capacity constraint. “In July, we aim to hike prices by roughly 3% to 5% in Germany and other European nations, and something similar is in the works for August in the United States,” a Hankook official stated. Due to difficulty bringing in potatoes, fast-food chain Lotteria has replaced french fries with cheese sticks, which has impacted Korean consumers. The squeeze has rewarded some, with HMM shares up 12-fold since early 2020, with more growth on the way. “The volume of containers in the world is increasing. Our peak season is normally the third quarter, but due to the tightening of export markets, we expect the trend to continue into the fourth quarter “According to an HMM official. 1 dollar = 1,136.5700 won Cynthia Kim contributed reporting, while Sam Holmes and Raju Gopalakrishnan edited the piece./n
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