[The Industrial Heart Beats Again] Containers Piled Like Mountains... The Frontline of the 'Logistics War' Leaves No Breathing Room

[Asia Economy Busan=Reporter Dongwoo Lee] "For foreign shipping companies, the premium charge on a 40-foot container can exceed $7,000 to the US West Coast. This is $1,500 higher than the average ocean freight rate, yet some export companies reluctantly sign contracts just to meet delivery deadlines."

Kim Hyogon, CEO of New World Shipping, who has been engaged in international trade as a forwarding agent for over 30 years, recently spends much of his time securing vessels to transport products together with exporters. This was unimaginable during the first half of last year when he was visiting exporters to secure shipping volumes. Kim said, "Freight rates have nearly tripled compared to last year, making it extremely difficult to find both ships and containers. If I request five, getting even two or three is considered fortunate."

Since the second half of last year, the ‘logistics crisis’ faced by export companies has shown signs of prolongation. This is the result of a surge in ‘revenge consumption’ demand centered on the US and Europe following the COVID-19 pandemic, which has driven global cargo volumes upward. Ships departing from Asia, including South Korea, have simultaneously arrived at the major export route of the US West Coast, causing congestion and waiting times offshore for unloading. In this situation, major ports in China, a key production country, are drawing in global shipping companies like a black hole to handle the overwhelming volume. Amid the loud horn sounds signaling global economic recovery, domestic export companies are also struggling to join the ranks.

◆ Busan New Port Fully Loaded... "Even Loading Containers Is Difficult" = On the 8th, at Pier 4 of Busan New Port International Terminal (HPNT) in Gangseo-gu, Busan, 2TEU-sized containers (1TEU = one 20-foot container) waiting for shipment were densely stacked in the yard. An HMM official who accompanied us explained that the maximum vertical stacking height of containers (about 15m), which is six tiers, has been maintained for several months since early this year. The container capacity of Pier 4 is already saturated. The container occupancy rate, which indicates the port’s container handling capacity, approached 90% last month. Before the logistics crisis, the occupancy rate averaged around 70%. This was a scene showing South Korea’s economy rapidly recovering in a ‘V-shaped’ manner after the COVID-19 crisis.

On the afternoon of the 8th, the HMM Prestige was waiting to unload at Pier 4 of Busan New Port International Terminal (HPNT) in Gangseo-gu, Busan.

However, the rapid increase in export volumes has caused side effects in many places. Although HMM plans to urgently deploy two new ultra-large container ships with a capacity of 16,000 TEU this month, it is still insufficient to resolve the logistics difficulties. A port official said, "While a single quay crane can load an average of about 30 containers per hour, sometimes only about 28.5 containers per hour can be loaded due to the need to rearrange containers stacked at the bottom."

◆ Small and Medium Exporters Suffer ‘Double Hardship’ Amid Daily Freight Rate Records = Small and medium-sized enterprises (SMEs) with relatively low export volumes are also suffering significant damage. A representative of Company A, which exports automotive parts domestically, said, "Freight rates have tripled over the past year, leaving no production margin, so we are considering whether to continue exporting. We are negotiating with buyers to raise sales prices, but this is expected to take considerable time, so we have many concerns." In fact, the Shanghai Containerized Freight Index (SCFI), which aggregates freight rates for 15 container shipping routes, reached an all-time high of 3,703.93 points as of the 11th, up 90.86 points from the previous week. This is 3.65 times higher than one year ago (1,015.33), since the index began in October 2009.

◆ Port Authority Opens Remaining Land, but Insufficient = Industry insiders agree that measures are needed to support small and medium export companies facing rising shipping costs and difficulties in securing vessels to sustain the ‘V-shaped’ economic recovery atmosphere. Earlier, Koo Ja-yeol, Chairman of the Korea International Trade Association, met with Prime Minister Kim Boo-kyum and requested the reinstatement of the third-party logistics cost tax credit under the Special Tax Treatment Control Law, which expired at the end of last year. Cho Sung-dae, a research fellow at the Korea International Trade Association, advised, "With ocean freight increases expected to continue through the second half of this year, exporters themselves need to find ways to save costs. When freight rates rise during the exchange of goods, it is necessary to renegotiate cost issues and insurance terms with buyers."