S Korea’s container squeeze throws exporters into costly gridlock
BUSAN: Unable to get a slot on a container vessel, Lee Sang-hoon is considering using fishing trawlers docked for repair in the South Korean port of Busan to meet surging export orders for the car engine oil he sells to Russia.
“China is the black hole in this shipping crisis, all the carriers are headed there,” said Lee, owner of Dongkwang International Co in Busan which makes about 20 billion won ($17.60 million) in annual revenue.
“Those fishing boats out there could be an answer for us because we’re already one month behind schedule. That is, if we can iron out packaging issues,” Lee said, pointing out to empty fishing trawlers visible from his Busan office.
Booking trawlers is one way businesses in the world’s seventhlargest exporting nation are trying to overcome critical bottlenecks caused by the pandemic, particularly a shortage of shipping containers.
Thousands of exporters like Dongkwang are struggling to move their goods through Busan, the world’s 7th busiest container port, where terminals handle over 59,000 containers daily to process about 75 per cent of all shipping for the country.
As global carriers race to deliver everything from furniture to toys to US and European consumers, they prioritise much larger batches of cargo waiting to be picked up along China’s factory belt over Busan. That leaves fewer vessels in the Korean port and a glut of them in China, cargo managers at Busan’s terminals said.
“As many (ships) depart from China where factories are mostly fully in operation, there’s little vessel space left by the time they stop in Busan,” said Lee Eung-hyuk, a marketing director at Busan Port Authority.
Some do not stop in Busan at all. The number of incoming container ships in Busan fell almost 10 per cent through May this year even as exports soared 23.4 per cent from a year earlier, according to data from the port authority, resulting in a very uneven recovery for Asia’s fourthlargest economy.
On a real-time map of the world’s major vessels at a control tower operated by HMM Co, the country’s biggest container carrier, most of the red and yellow dots show its alliance fleet concentrated around China and Singapore, not Korea.
While the shipping squeeze caused by the pandemic is a global problem, the congestion at a transit hub like Busan has made things worse for smaller Korean exporters.
When Yantian, one of China’s busiest ports, was partially shut down in June to control virus cases, some cargo was diverted to neighbouring ports such as Busan, worsening the backlogs and periodic delays.
“It’s a transit hub with so many in and outs. We need to ship 30 containers a month but have only been able to secure about 70 per cent to 80 per cent of that,” said Lee at Dongkwang International, adding that his company recently raised prices due to higher shipping costs.
Carriers sometimes refuse to accept bookings at all, or force customers to accept much higher spot rates, according to Lee.
The pain is most acutely felt on lesspopular routes smaller firms often use, making shipping rates from Busan to Vladivostok rise faster than to the US West Coast, for example.
Dongkwang currently pays $2,200 per twenty-foot equivalent units (TEU) for the route, up about six times from a year earlier.
For South Korea’s larger industrials like Samsung and LG, the shipping squeeze isn’t as dire because carriers tend to prioritise orders from customers with deep pockets and a larger volume of goods to be shipped.
To provide relief, the government has helped finance HMM orders for more containers and expanded cash handouts to support affected small-tomedium exporters.
At Busan’s New Port, terminal congestion is clearly visible. At one of the five new terminals, outbound containers full of goods were stacked to their vertical limits.
As global carriers race to deliver everything from furniture to toys to US and European consumers, they prioritise much larger batches of cargo waiting to be picked up along China’s factory belt over Busan