Global challenges in the supply chain hit the Korean economy: The DONG-A ILBO

Coupled with production stoppages due to China’s power shortage, countries in Southeast Asia closing borders due to the pandemic, and difficulties with sea transportation, the Korean economy is suffering from a global shock in the supply chain. With domestic production, consumption and investment falling in August, the situation could affect exports, which hit a 65-year high last month.

Korean companies in China are often forced to cease operations as provincial governments cut or suspend electricity supplies due to the government’s suspension of Australian coal imports due to trade disputes with Australia. Korean electronics, textiles, and apparel manufacturers in Vietnam, Indonesia, and Malaysia see operating rates drop below 20%. Such conditions signal a serious disruption ahead of major shopping events like US Black Friday (November 26th) and China’s Singles’ Day (November 11th).

The number of cars sold by Hyundai Motor and Kia Motors in September also declined 20% year over year as the automaker suffered from semiconductor supply bottlenecks. Small businesses cannot ship their goods due to difficulties in sea transportation. Although logistics volumes are increasing due to the resumption of consumption in advanced economies, loading and unloading in major ports is delayed while shipping costs are increasing. To make matters worse, international oil prices, LNG and other fuel and raw material costs are also exploding. Many raise concerns about the risk of stagflation that arose during the oil shocks of the 1970s, when oil shortages caused inflation and recession at the same time.

This shock in the supply chain is beyond the level that companies can handle on an individual level as their cocoa is quite complicated: power struggle between the US and China, COVID-19, response to carbon neutrality. Government shouldn’t waste time working with businesses to devise medium-term strategies to respond to evolving global supply challenges.

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