[Rediscovering Trading Companies] Sought by Trade Authorities... Emerging as a Key Link in the Supply Chain

As Trade Disputes and Uncertainties Grow
Trade Authorities Say "Must Play Three Roles Alone"

"It is difficult to shine when the market is stable, but when instability and supply chain issues arise as they do now, the role tends to be spotlighted again. As economic security is emphasized, I believe the global networks we have built so far can be usefully utilized."

Comprehensive trading companies, which were once 'export vanguards,' are transforming into key supply chain links amid the US-China hegemonic competition. With trade disputes frequently erupting and unexpected issues such as wars or infectious diseases destabilizing supply chains, trading companies with global networks have taken on a pivotal role. Since supply chain systems can malfunction anywhere and anytime, the role of trading companies is expected to grow even more.

Containers piled up at Busan Port
Photo by Yonhap News

Jung In-kyo, head of the Trade Negotiation Headquarters overseeing South Korea's foreign trade affairs, recently visited POSCO International, the country's largest comprehensive trading company. This is the first time in two years since 2022 that the head of the Trade Negotiation Headquarters has visited a trading company. However, unlike the previous visit, which was driven by clear issues such as the Russia-Ukraine conflict and Indonesia's palm oil export ban, this visit reflects that supply chain crises have become a constant rather than isolated incidents over the past two years.

At a meeting with POSCO International's management, Head Jung said, "With the recent US-China hegemonic competition, carbon neutrality, and geopolitical crises, uncertainties across industries, energy, and food supply chains are increasing, shifting the paradigm from the era of free trade to economic security." He added, "Comprehensive trading companies must play three roles in one." While they previously focused on leading domestic companies' exports, he urged them to also support domestic SMEs' overseas expansion and manage supply chains.

Jung In-kyo, Head of Trade Negotiations at the Ministry of Trade, Industry and Energy, visited the headquarters of POSCO International in Songdo, Yeonsu-gu, Incheon on the morning of the 14th to discuss the role of general trading companies in expanding exports and stabilizing global supply chains.
[Photo by Yonhap News]

From the perspective of comprehensive trading companies, supply chains are emerging as new growth engines. Supply chain management essentially corresponds to intermediary trade, playing a vanguard role in resolving supply and demand based on global networks. A representative example is the role of trading companies in resolving the 2021 urea solution shortage. At that time, POSCO International and LX International worked tirelessly across Australia, Mexico, Vietnam, Malaysia, and other countries to secure urea solution.

Neither company had previously handled urea solution. Nevertheless, they contributed to overcoming the crisis through the agility demonstrated by their diverse overseas branch networks and accumulated trade experience. Some overseas suppliers who agreed to supply urea solution had no prior export experience, but local trading company staff directly handled customs clearance and other procedures to assist in securing the supply.

STX has secured production and sales rights for the Caula Mine in Mozambique, Africa.
[Photo by STX]

Recently, as electric vehicle adoption has increased, demand for raw materials such as graphite and nickel has risen, prompting direct investments in overseas mines to stabilize supply chains. Some trading companies have also rolled up their sleeves in the food business, considering not only domestic supply but also overseas local sales. They are conducting or expanding resource development projects such as gas fields and mining sites worldwide, while also leading renewable energy projects as part of new business initiatives. These are advanced fields that determine future competitiveness and are directly linked to human survival, thus regarded as areas of economic security.

The relationship between comprehensive trading companies and the government is expected to become even closer. When Head Jung emphasized, "Now, based on overseas networks, we must be reborn as the vanguard for stabilizing supply chains of critical minerals, energy, raw materials, and food," POSCO International responded, "We will strengthen communication with the government regularly and work hard to reinforce supply chains in energy, eco-friendly materials, and food businesses."