Explainer: How South Korea's trucker strike could paralyse critical supply chains

HYUNDAI STEEL

24/11/2022 08:12

SEOUL, Nov 24 (Reuters) - The second mass strike by
unionised truckers in South Korea in less than six months on
Thursday has the potential to cripple supply chains in an
export-driven economy which is the world's 10th-largest. 
    After an eight-day strike in June cost more than $1.2
billion in lost output and unmet deliveries, here's how the
latest dispute could affect various strands in the economy - and
the disagreements that need to be resolved.
    WHAT ARE THE STICKING POINTS?
    Amid soaring fuel costs, truckers - many of whom are
self-employed - are calling on the government to make permanent
a minimum-pay system known as the 'Safe Freight Rate' that is
due to expire by the end of the year, and to expand benefits for
truckers in other industries, including oil tankers. 
    Truckers are also seeking representation in consultations to
determine the freight rate. 
    However, a ruling party proposal for an amendment to the
system eases punishment for businesses if they do not comply
with the Safe Freight Rate compensation system. 
    The government has also said there is no justification in
broadening out Safe Freight Rate coverage, claiming truckers
already get paid fairly well. 
    HOW MANY TRUCKERS ARE ON STRIKE? 
    The transport ministry said about 9,600 people attended
rallies on Thursday, while the Cargo Truckers Solidarity Union's
(CTSU) estimated members number 22,000. In contrast, some
420,000 truckers are estimated to be in South Korea, according
to union officials. 
    AUTO SECTOR 
    Hyundai Motor  005380.KS  said in a statement that logistics
and vehicle production at its main Ulsan plant remain
"unaffected at this stage". But in June, production at Ulsan
fell to below 60% of normal output because of component
shortages caused by the strike, according to Hyundai Motor's
union in Ulsan. 
    The June strike cost the country's automakers more than
5,400 vehicles in total output, the Korea Automobile
Manufacturers Association said. The trade ministry estimated the
June strike cost automakers more than 250 billion won ($188
million).
    STEEL
    A Hyundai Steel  004020.KS  spokesperson said on Thursday
its daily shipment of about 8,000 tonnes of steel products at
its Pohang factory could not be moved due to the strike. POSCO
 005490.KS  has warned that fresh action could slow repair work
at a major plant hit by floods this summer. 
    During the June strike, five Korean steelmakers including
POSCO and Hyundai Steel failed to ship 721,000 tonnes of
products, according to the Korea Iron & Steel Association. The
resulting output loss reached 1.15 trillion won, according to
government estimates.     
    CEMENT 
    The cement industry is expected to be one of the earliest
hit by the truckers' strike, with cement company clients not
having storage space for more than two or three days worth of
inventory. An official at lobby group Korea Cement Association
told Reuters construction sites might run out of building
material by as early as next week. 
    During the eight-day June strike, the cement industry saw
106 billion won in lost revenue, according to the association.
    PETROCHEMICALS 
    Officials at three petrochemical companies told Reuters that
they had yet to see any impact on operations as the strike has
just begun, and had informed clients of the impending strike and
shipped products in advance. 
    During the June strike, daily shipment of products at major
petrochemical companies slid to around 10% of usual levels,
according to the Korea Petrochemical Industry Association.
    The industry ministry estimated that the strike cost the
petrochemical sector about 500 billion won at the time.
    WHAT WAS THE DEAL THAT ENDED THE JUNE STRIKE?
    During the June strike, transport ministry and truckers'
union agreed to "extend" the minimum freight rate and continue
discussing expanding a guarantee of minimum pay for carrying
cargo to cover additional products. The transport ministry said
it would also review expanding fuel subsidies. 
    Despite the strike being brought to a close, there were
lingering disagreements about whether the government and the
ruling party had agreed to make the minimum freight rate a
permanent feature, or merely extend a temporary measure for
another fixed period. This discord ultimately ignited the
current strike. 
($1 = 1,327.8300 won)
    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
South Korea truckers strike again with auto, battery supply
chains at risk     urn:newsml:reuters.com:*:nL1N32K017
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
 (Reporting by Joyce Lee, Heekyong Yang and Ju-min Park; Editing
by Kenneth Maxwell)
 ((joyce.lee@tr.com;))