Muristek
The Port of Busan, South Korea
The suspended land, air and sea routes to and from Russia are putting South Korean exporters from Samsung Electronics Co. and Hyundai Motor Co. to small-sized manufacturers in a bind, with their shipments headed for Russia stranded in the port of Busan or in other countries. Russia is South Korea's 10th-largest trading partner, from which Asia's No. 4 economy imports key raw materials such as crude oil, aluminum and naphtha. It also serves as a gateway to Europe for Korean exporters. After Russia invaded Ukraine late last month, almost all Russia-bound cargo ships and airlines have been stopped.Regarding land transportation, Korean exporters have increasingly switched to the Trans–Siberian Railway (TSR) to move their goods to Europe after air and seaborne freight rates shot up in the protracted pandemic situation. In other words, the bulk of their Europe-bound goods was loaded on a cargo liner in Busan, on the southeastern tip of the Korean Peninsula and shipped to Vladivostok, Russia. They were then transported via TSR to Europe. RAILROADSSince the outbreak of the war in Ukraine, the TSR route between Moscow and Ukraine's capital city of Kyiv has been suspended. The route connecting Moscow and St. Petersburg is currently in normal operation, but has not received new bookings since the start of this month, according to logistics industry sources on Mar. 6.Now that the TSR's route of Moscow to Warsaw via Kyiv also has been suspended, Korean logistics companies are shifting to the third route of Moscow-Warsaw via Minsk, Belarus.But as the US and European Union step up sanctions against Belarus, which supported Russia's invasion of Ukraine, the TSR route of Moscow-Minsk-Warsaw is exposed to the shutdown risk as well, according to industry sources. If the last TSR route is suspended, all road transport routes from South Korea to Europe will likely be cut off.On Sunday, South Korea announced export sanctions against Belarus to block exports of some goods to the country, mirroring its recent export controls imposed against Russia."If the war in Ukraine is prolonged, the transshipment market from the port of Busan to the port of Vladivostok and then to Europe via TSR could collapse," said a logistics industry official. SEA ROUTES
HMM Co., South Korea’s largest container line, is set to join global container ship operators in suspending operations to and from Russia to cut the country out of global supply chains.According to the Busan Port Authority, Russia is one of the few popular stopover places for cargo ships departing from Busan, South Korea's largest port city. In January 2022, cargo volume from Busan to Russia surged 58% on-year, exceeding the average annual growth of 35% since 2020.The number of regular container liners operating from Busan to Russia more than tripled to 15 on-year as of January 2022. The vessel HMM GDANSK, a container ship,IMPACT ON POSCO, SMEs
After two major hub ports in Ukraine -- Odessa and Mykolaiv -- were blocked due to Russia's attack, POSCO International Co., a South Korean trading company, stopped operations of its grain terminal in Mykolaiv on the Black Sea. "Because logistic routes are blocked, we stopped our terminal operation there," said a POSCO International official. For a South Korean portal stove manufacturer, its gas stoves have been stuck in Turkey since the Russia-Ukraine war broke out. The goods were supposed to be delivered to its client in the port of Odessa, according to the Korea International Trade Association (KITA).The company now needs to pay long-term storage fees for the goods, unless it finds a new buyer for the portable stoves in Turkey."We'd like to dump them into the sea," said an official of the company, asking for anonymity. Korean Air Lines' aircraft at Incheon International Airport AIR ROUTESKorean Air Lines Co. on Mar. 5 stopped its passenger flights to and from Moscow until Mar. 18 since its planes cannot be refueled in Moscow. Korean Air flew once a week between Seoul and Moscow.Another domestic carrier Asiana Airlines Inc. said on Sunday that its Europe-bound cargo planes, which operated seven times a week, would not make a stopover in Moscow from Mar. 6 to Mar. 20.The flight cancellations added to the difficulties for Korean exporters.An unidentified Korean components maker was recently ordered by a big domestic client with operations in Russia to pay a penalty for delayed delivery."We cannot help but pay the penalty not to ruin our relationship with the big client," the company official told The Korea Economic Daily.SEEKING GOVERNMENT'S EMERGENCY SUPPORTOver the past week, KITA has collected 346 cases from South Korean companies having difficulties in shipping their goods, or having yet to receive payments from clients in the wake of the Russia-Ukraine war. Of the cases, 56% were related to payments and settlements. Issues related to logistic routes and supply chains came next, accounting for 32% of the cases.A domestic welding machine company has been unable to deliver its products to a Russian client since late last month. The ship carrying its welding machines has been stranded in Amsterdam, where it was supposed to stop over for a few days on its way to St. Petersburg. "Not alone enormous losses from additional freight charges and storage fees. we have to pay a penalty to our client for failing to meet the delivery schedule," said an official of the company, asking for anonymity of both his company and himself. A growing number of Korean small and medium-sized exporters are asking for the government's emergency financial support to pay their increased logistics costs, including storage fees, according to the KITA. By Kyung-Min Kang and Jeong-Min Namkkm1026@hankyung.comYeonhee Kim edited this article