South Korean exports suffer from Chinese ‘black hole’ rules

  • Reuters, BUSAN, South Korea

Unable to secure a place on a container ship, Lee Sang-hoon plans to use fishing trawlers moored for repairs in the South Korean port of Busan to meet growing export orders for motor oil he sells to Russia.

“China is the black hole in this shipping crisis, all carriers are heading there,” said Lee, owner of Dongkwang International Co in Busan, which earns around 20 billion won ($ 17.60 million). annual income.

“Those fishing boats over there could be an answer for us, because we are already a month behind. In other words, if we can solve the packaging problems, ”said Lee, pointing to the empty fishing trawlers visible from his Busan office.

Reserving trawlers is a way for companies in the world’s seventh largest exporter to overcome critical bottlenecks caused by the COVID-19 pandemic, particularly the shortage of shipping containers.

Thousands of exporters like Dongkwang struggle to move their goods through Busan, the seventh busiest container port in the world, where the terminals handle more than 59,000 containers per day to handle around 75% of all shipments for the country.

As global carriers rush to deliver everything from furniture to toys to the United States and Europe, they are prioritizing much larger batches of goods waiting to be picked up along the Chinese factory belt. above Busan.

That leaves fewer ships in the South Korean port and a glut in China, cargo managers at Busan terminals said.

“As much [ships] If you are departing from China where the factories are mostly fully operational, there is little space left for the ships by the time they stop in Busan, ”said Lee Eung-hyuk, marketing director at the Port Authority. Busan.

Some don’t stop in Busan at all. The number of inbound container ships to Busan fell nearly 10% through May, even as exports soared 23.4% from the previous year, according to port authority data, causing a uneven recovery for Asia’s fourth largest economy.

On a real-time map of the world’s major ships in a control tower operated by HMM Co, the country’s largest container ship, most of the red and yellow dots show its Alliance fleet concentrated around China and Singapore, not South Korea.

While the resulting shipping squeeze is a global problem, congestion at a transit hub like Busan has made matters worse for South Korean small exporters.

When Yantian, one of China’s busiest ports, was partially closed last month to control cases of the virus, some cargo was diverted to nearby ports such as Busan, compounding periodic arrears and delays. .

“It’s a transit hub with so many entrances and exits. We have to ship 30 containers per month, but we were only able to guarantee about 70-80%, ”Lee said, adding that his company had recently increased prices due to higher shipping costs.

Carriers sometimes refuse to accept bookings at all or force customers to accept much higher cash rates, he said.

The pain is more acute on the less popular routes that small businesses often use, causing shipping rates from Busan to Vladivostok, Russia to rise faster than to the west coast of the United States, for example.

Dongkwang pays US $ 2,200 per twenty-foot equivalent unit for the route, about six times more than a year earlier.

For the biggest South Korean manufacturers like Samsung Electronics Co and LG Electronics Inc, the compression of shipments is not as bad as carriers tend to prioritize orders from customers with deep pockets and a higher volume of goods. to send.

To provide relief, the South Korean government has helped fund HMM’s orders for more containers and increased cash distributions to support affected small and medium exporters.

At the new port of Busan, terminal congestion is clearly visible.

In one of the five new terminals, outgoing containers full of goods were stacked up to their vertical limits.

Transit ships carrying thousands of containers were unloaded by automated cranes, which use artificial intelligence to find space for the steel crates.

Every 10 seconds, a truck carrying a 20-foot or 40-foot container passes through the gate, taking them to warehouses, which already seem to be packed.

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