S Korea truckers’ strike disrupts $2.6bn worth of shipments over 12 days

Pearl Bantillo

06-Dec-2022

SINGAPORE (ICIS)–South Korea has so far tallied won (W) 3.5tr ($2.6bn) worth of shipments disrupted by an ongoing truckers’ strike now on its second week, prompting output cuts from petrochemical producers.

  • Truckers’ protest on 13th day
  • Cracker operators cut run rates to 65-85% – sources
  • Government mulls expanding return-to-work order

The estimated provisional damage across the steel, petrochemical, oil refining cement and automobile industries was over a 12-day period (24 November-5 December) of the protest, South Korea’s Ministry of Trade, Industry and Energy (MOTIE) said on Tuesday.

In the petrochemical industry, several ethylene producers have lowered their cracker run rates to 65-85% of capacity from 75-90%, to manage their inventories after logistics issues led to a slowdown in downstream operations, market sources said.

“In the case of the steel and petrochemical sectors, due to the lack of storage space inside and outside the factory due to accumulated shipment disruptions, the possibility of damage from production disruptions is increasing, such that some companies have had to consider reducing production as early as this week,” MOTIE said.

For the petrochemical industry, about 71m tonnes of shipments worth W923.8bn were disrupted between 24 November to 4 December, MOTIE said, noting that the consequent plant shutdowns would result in a maximum daily average damage of W122.9bn.

In the oil refining sector as of Tuesday, 85 gas stations nationwide were confirmed to be out of stock because of the strike.

The South Korean government is taking a hardline stance this time against the Cargo Truckers Solidarity Union (CTSU), having issued on 29 November an unprecedented executive order to force truckers working in the cement industry to go back to work, citing a serious threat to the construction industry.

On Tuesday, MOTIE said that cement shipments were recovering and were now at “88% of normal level” following the government order.

President Yoon Suk-yeol is looking at expanding the coverage of the return-to-work order to include all striking truckers.

“We are reviewing whether to issue the order,” MOTIE minister Lee Chang-yang said in a statement.

This is the second strike in less than six months launched by the CTSU, which is affiliated with the Korean Confederation of Trade Unions.

“We are taking seriously the damage situation in the oil refining, steel, and petrochemical fields…and preemptively start work even during this week before the enormous damage becomes a reality,” Lee said.

In June, a similar protest by the group lasted eight days, with the government acceding to extend a “Safe Trucking Freight Rate” system, which guarantees a minimum annual wage for truckers to help them cope with surging fuel costs and to deter dangerous driving.

CTSU now demands that the system, which is due to expire by end-December this year, become permanent.

The fourth-biggest economy in Asia is expected to shrink in the fourth quarter amid the prolonged truckers’ strike.

($1 = W1,321)

Focus article by Pearl Bantillo

Additional reporting by Yeow Pei Lin

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