[Diesel Price Shock] "Might as Well Stop the Cars" Direct Hit to Both Industrial Sites and Workers

Cement and Ready-Mix Costs Increase Burden, Causing Distress
'Diesel Cheaper Than Gasoline' Is Now a Thing of the Past

85-ton class ultra-large dump trucks transporting limestone from the limestone quarry to the crushing plant. They consume an enormous amount of diesel, traveling only 246 meters per 1 liter of diesel.
[Photo by Kim Jonghwa]

[Asia Economy Reporters Jonghwa Kim, Chulhyun Kim, Hyunseok Yoo, Chunhan Lim] A gas station located along the roadside in Yeongwol-gun, Gangwon-do, sees more than ten large trucks entering daily, coming and going from nearby limestone mines. This is because trucks need to fill up with fuel to transport limestone, a key raw material for cement production, to factories nationwide. The once lively atmosphere at this gas station has recently dampened due to soaring diesel prices. The sharp increase is so significant that the gas station staff cannot ignore the wary glances of their main customers, the truck drivers. Some turn away after checking the prices. Staff often keep their distance as drivers silently refuel with grim expressions and sighs. "How much higher will it go? At this rate, it might be better to just stop driving," said Lee Younghwa (pseudonym), who has been behind the wheel for 10 years, his outlook as bleak as the dust from limestone scattering in the air.

Diesel Price Surge Hits Industry and Distribution Hard

The rise in diesel prices is delivering a direct blow to industrial sites. Particularly hard hit are the cement, ready-mix concrete, and gas industries, which operate large trucks and heavy machinery running on diesel. A domestic cement company has included a 'fuel price linkage system' in the freight vehicle safety fare system, paying drivers more when diesel prices rise. Recently, this company has faced tens of billions of won in additional annual costs due to diesel price hikes. However, the burden on drivers has not been fully alleviated. One driver operating the company's vehicles lamented, "Since we have to get work from the company, it's hard to closely monitor whether the fuel price increases are properly reflected."

Cement companies operate 85-ton class ultra-large dump trucks and loaders at their mines. The 85-ton dump trucks transporting blasted massive limestone from the quarry to the crusher run only about 246 meters per liter of diesel, consuming typically 3 to 4 drums of diesel daily, requiring an enormous amount of fuel. Cement company S operates 57 of these 85-ton dump trucks and 18 ultra-large loaders of similar size, using large quantities of diesel to run various equipment at their plants. Based on last year's diesel price of 1,250 KRW per liter (2021 average), S spent 13 billion KRW on diesel alone.

Moreover, the freight rates for bulk cement trailer (BCT) drivers, who operate cement-exclusive transport vehicles, must also be increased in line with the rising diesel prices. This is because the freight vehicle safety fare system includes a 'fuel price linkage fare agreement.' Therefore, up to mid-May this year, S has spent an additional 5.4 billion KRW on diesel and fuel-linked costs compared to the same period last year, based on a diesel price of 1,830 KRW per liter. With diesel prices surpassing 2,000 KRW, the total diesel and linked costs by the end of May are estimated to reach at least 6 to 7 billion KRW.

A company official said, "Unexpected cost increases due to the ongoing high prices of thermal coal and soaring diesel prices have put our financial operations in crisis," adding, "We are deeply worried about how to cope with this."

The situation is similar for ready-mix concrete manufacturers and sellers. Ready-mix concrete mixer truck drivers are independent contractors, but the companies cover their fuel costs. One ready-mix concrete company reported that by mid-month, diesel purchase costs had increased by 40% compared to the same period last year.

A representative from a ready-mix concrete company said, "I don't know why such bad news keeps repeating," and added, "The government should consider measures to save companies, even if it means lowering fuel taxes further."

The distribution industry is also facing increased logistics costs due to rising diesel prices. A distribution industry official said, "Internally, we estimate that every 100 KRW increase in diesel prices impacts annual costs by about 1.2 to 1.5 billion KRW," adding, "We feel frustrated as there are no special countermeasures."

Currently, dawn delivery companies are providing fuel subsidies to directly employed delivery drivers and optimizing delivery routes to improve efficiency as self-help measures. For non-directly employed drivers, logistics companies reportedly provide fuel subsidies.

A dawn delivery company representative said, "The rise in diesel prices is significantly affecting the cost structure of e-commerce and courier industries," adding, "We are just waiting for government support measures."

There are also forecasts that rising diesel prices will lead to increases in living costs. A convenience store industry official said, "When diesel prices rise, logistics companies have to support delivery drivers, which raises delivery costs," predicting, "This will eventually cause a domino effect leading to product price increases."

A massive dump truck and loader transporting limestone at a limestone quarry. Due to the recent cement supply crisis, cement companies have been mining limestone overnight at quarries. The work environment, where the surroundings are not visible, reflects the current situation faced by our companies.
[Photo by Ssangyong C&E]

Cargo Truckers' Union Declares General Strike to Secure Livelihood

It is not only companies facing difficulties. Cargo workers claim they are experiencing a survival crisis due to the skyrocketing diesel prices. They have announced a full-scale, indefinite general strike demanding increased freight rates and expansion of the safety fare system. Although only about 5% of all cargo trucks are union members, the high proportion of cement and container trucks suggests the strike could cause significant logistics disruptions.

According to industry sources on the 27th, cargo workers affiliated with the Cargo Truckers' Union under the Korean Confederation of Trade Unions (KCTU) declared they will begin an indefinite general strike from midnight on the 7th of next month, demanding the abolition of the safety fare sunset clause and protection of their livelihoods amid soaring fuel prices. This is the first general strike by the Cargo Truckers' Union in about six months since November 25-27 last year.

On the 23rd, the Cargo Truckers' Union of the KCTU Public Transport Workers' Union held a press conference in Jeongdong, Seoul, announcing the strike and stating, "Due to the recent surge in diesel prices, cargo workers are facing a severe survival crisis with additional fuel expenses amounting to hundreds of thousands of won."

They added, "Some government measures such as fuel price-linked subsidies are insufficient to resolve the deficit transport situation of cargo workers," and demanded, "A legal and institutional safety net must be established to guarantee cargo workers' livelihoods."

The specific demands include abolishing the safety fare sunset clause, expanding safety fares to all vehicle types and cargo items, increasing freight rates, abolishing the subcontracting system, expanding labor rights, and broadening industrial accident insurance coverage.

Lee Bongju, head of the Cargo Truckers' Union, said, "For the first time in 14 years, diesel prices have surpassed gasoline prices, exceeding 2,000 KRW per liter, but government measures are merely for show," criticizing, "The only law protecting cargo workers, the safety fare system, is pending in the National Assembly and is scheduled to expire in seven months."

According to the Korea National Oil Corporation's Opinet fuel price information service, as of the 26th, the average diesel price at gas stations nationwide was 2,003.86 KRW per liter. On the same day, the average gasoline price was lower at 2,001.82 KRW per liter. Since the 11th, diesel prices have surpassed gasoline prices, making the era of 'diesel cheaper than gasoline' a thing of the past.