Trucker strike threatens PP, PE exports from S Korea

Around 15,000 truck drivers began an indefinite strike at ports and container depots across South Korea on 7 June, threatening to slow the country's exports of polymers and other consumer goods.

The strike is linked to the South Korean government's plans to remove the coverage for truck drivers working in the container and bulk cement sectors under the country's "safe rates" system by the end of the year. The system, which offers truck drivers minimum wages derived from operating costs, has helped cushioned the impact of soaring fuel prices and living costs on such drivers.

The cargo truckers' solidarity division of the Korean public service and transport workers' union demanded that the "safe rates" system be continued for and its coverage extended to drivers of all other vehicles and to all freight types, the International Transport Worker's Federation (ITF) said. "The impact of the strike is already being felt at ports, petrochemical complexes, and other logistics hubs, where freight transport has slowed or stopped all together," the ITF said.

South Korean polyethylene (PE) and polypropylene (PP) exports are likely to slow down because producers may find it difficult to move their products to shipping ports, market sources said. Some producers that anticipated the strike have expedited transfers of their PE and PP supplies to container yards last week. But the strike could also prevent or slow the transfer of containers from yards to vessels, market sources said.

Some producers were postponing their export shipments by 1-2 weeks because of disrupted local trucking services. Some southeast Asian buyers anticipate 1-2 weeks of delay in their PE and PP imports from South Korea. But a South Korean polymer converter that utilises non-unionised logistics companies said the trucking of its imported polymers from ports to its factory has not yet been affected.

Taking a wait-and-watch approach

South Korean polymer producers, importers and converters have mostly adopted a wait-and-watch approach, hoping that the strike will end soon.

A prolonged strike will likely affect domestic trucking of PE and PP, consumer goods as well as exports. Polymer producers may see their inventories grow if the logistical challenges persist. But lower polymer production associated with weaker olefin and polymer production margins, as well as planned and unplanned shutdowns, could relieve some inventory pressure.

South Korean producers have been increasing their exports to southeast Asia in the last few months, because of weaker demand in China, a key market. Commercial and logistical activities were disrupted in China during the strict Covid-19-related lockdowns imposed earlier this year.

South Korea also added massive PE and PP capacity in 2021, prompting the country to increase its exports. It added new capacities of 2.35mn t/yr of PE and 1.3mn t/yr of PP last year.

Offers for South Korea-origin high density polyethylene (HDPE) and PP raffia supplies in the Vietnamese market were competitive over the last few weeks, widening the price gap between polymer prices in Vietnam and those in other southeast Asian countries.

Argus' preliminary assessments for HDPE film prices were $1,200-1,220/t cfr Vietnam and $1,240-1,280/t cfr southeast Asia on 9 June, with prices in Vietnam subject to zero import tariffs. Preliminary assessments for PP raffia prices were $1,200-1,230/t cfr Vietnam and $1,210-1,230/t cfr southeast Asia on 9 June, with prices in Vietnam subject to lower import tariffs.

Short delays in South Korean PE and PP exports will likely have no impact on regional prices yet, with a recovery in Chinese demand to play a bigger role in setting the tone for prices in other Asian markets in the next few weeks, market participants said. South Korean polymer export negotiations for June shipments have already closed. PE and PP export negotiations are currently focusing on cargo shipments between July and early August.

South Korean ports are the main transshipment hubs for container vessels heading to Latin America. The Busan port is the sixth-largest container port in the world, with a container throughput of 21.6mn 20-foot equivalent units (TEUs) in 2020. It is also one of the busiest transshipment ports globally, handling around 9.8mn TEUs of transshipment cargoes every year, the Busan port authority said.

By Yee Ying Ang