219 Korean export manufacturers surveyed by the Korea Trade Association identified freight rate increases as their top logistics challenge in the first half, with 83.1% of respondents citing this as their primary concern. The Shanghai Containerized Freight Index (SCFI) reached 3,062 points on May 24, representing a 2.3-fold increase compared to late February levels before the Middle East war escalation. The surge stems from the Middle East conflict's impact on international oil prices and shipping rates, while 78.1% of surveyed companies reflected less than 20% of their increased logistics costs in product pricing, compressing profit margins across the export manufacturing sector.
Survey Reveals 83.1% of Exporters Face Freight Rate Pressures
The Korea Trade Association conducted a survey of 219 domestic export manufacturing companies regarding logistics challenges related to oil price fluctuations in the first half. 83.1% of responding companies identified freight rate increases as their greatest difficulty. The SCFI stood at 3,062 points on May 24, 2.3 times higher than late February levels prior to the Middle East war. This figure also represents 1.4 times the previous year's peak of 2,240 points. Additionally, 56.6% of companies cited rising raw material and component procurement costs as a major challenge.
![Logistics Cost Increase Rate and Procurement Cost Increase Rate [Source: Korea Trade Association]]()
Logistics Cost Increase Rate and Procurement Cost Increase Rate [Source: Korea Trade Association]
Export Manufacturers Struggle to Pass Logistics Costs to Customers
78.1% of responding companies reported reflecting less than 20% of cost increases in their product prices. 32.9% of companies indicated they could not reflect any cost increases in pricing, while only 5.5% of firms passed on 80% or more of their increased costs to customers. The limited ability to transfer logistics cost burdens directly impacts export manufacturers' profitability, as international freight rates continue to climb while competitive pressures constrain pricing flexibility.
Operating Profit Margins Decline Across Export Sector
85.9% of surveyed companies reported declining operating profit margins in the first half. 39.3% of firms experienced operating profit margin decreases of 3 to 5 percentage points. The combination of surging logistics costs and constrained pricing power has compressed profitability across the Korean export manufacturing sector, with the majority of companies absorbing cost increases rather than passing them through to end customers.
Korea Trade Association Warns of Continued Cost Pressures Through Q3
The Korea Trade Association projects that logistics cost burdens will persist in the near term, as oil price increases from the first half will be billed with a time lag extending into the third quarter. Domestic container inland transportation fee increases are scheduled for next month. Han Jae-wan, Director of the Logistics Services Division at the Korea Trade Association, stated: "Although recent international oil prices show lower levels compared to immediately after the war, companies in the field are experiencing difficulties with deteriorating profitability as accumulated oil cost burdens and freight rate increases cannot be reflected in product prices. As the Middle East war intensifies again and logistics congestion resolution is delayed, oil price increases are being passed on to export companies with a time lag across all export transportation sectors including maritime, air, and inland, raising concerns about downward rigidity in logistics costs."
FAQ
What percentage of Korean export manufacturers identified freight rate increases as their top logistics challenge in the first half?
83.1% of the 219 companies surveyed by the Korea Trade Association cited freight rate increases as their greatest logistics difficulty in the first half.
How much of their increased logistics costs could Korean exporters reflect in product pricing?
78.1% of surveyed companies reflected less than 20% of cost increases in product prices, with 32.9% unable to reflect any cost increases and only 5.5% passing on 80% or more of increased costs to customers.
What impact did rising logistics costs have on Korean export manufacturers' profitability?
85.9% of responding companies reported declining operating profit margins in the first half, with 39.3% experiencing profit margin decreases of 3 to 5 percentage points.
