Trucking Strike in South Korea
June 10, 2022
S Korea truckers’ strike to hit Ulsan petrochemical output; halts port ops
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SINGAPORE (ICIS)–The ongoing nationwide strike by unionised truckers in South Korea are forcing several producers in the petrochemical hub of Ulsan to consider production cuts amid logistics disruption.
Synthetic rubber giant Kumho Petrochemical is expected to slash production rates at its acrylonitrile butadiene styrene (ABS) and polystyrene (PS) units from the second half of June due to the strike, according to market sources.
HDC Hyundai Engineering Plastics Co is also expected to slash production at its 160,000 tonne/year PS plant in the complex.
While there have been no immediate reports of polyethylene (PE) production losses due to the strike, facilities in Ulsan and elsewhere in the country could be affected if the strike drags on.
The strike by the Cargo Truckers Solidarity (CTS) union entered its fourth day on Friday.
Some PE producers may face pressure to sell prompt cargoes or further reduce their cracker run rates owing to the ongoing strike by truckers.
If the transportation problem persists, “I expect more PE plants in South Korea will cutback or shut down in the short term,” ICIS senior analyst Amy Yu said.
The strike has slowed down the delivery of PE cargoes, raising concerns that some producers might have to lower their downstream operation, to manage their already high inventory if the logistic issues continue next week.
“South Korea is a major exporter in Asia PE market, which may lead to a decrease in the supply of short-term exports,” Yu said.
“In addition, due to the high naphtha cost, the average operating rate of steam crackers and PE plants in Korea has shown a relatively low level. The strikes may exacerbate this situation,” she added.
For polyethylene terepthalate (PET), export deliveries were able to continue this week as some cargoes had been prepared before the strike started, however domestic deliveries faced challenges with the reduced trucking capabilities.
For propylene, the country’s exports may increase should the strike be prolonged as domestic distribution of derivative products becomes disrupted, market sources said.
A senior truckers union official quoted by newswire agency Reuters on Friday said that the number of vehicles entering the complex in the country’s east has been cut to one-tenth of normal levels.
The union also plans more stringent strike action at other petrochemical complexes across the country, the unnamed official told Reuters.
The general strike by CTS under the wing of the Korean Confederation of Trade Unions, was launched on 7 June.
The truckers were demanding the government to extend a freight rate system, which guarantees basic wages to cope with surging fuel costs. The system was due to expire in December.
South Korea’s Ministry of Land, Infrastructure and Transport had expected some 7,500 members, representing about 35% of the CTS union, to go on strike on Friday,
There have been “local transport obstructions in some ports such as Busan Port and Ulsan Port. Carry-out volume is reduced compared to normal”, the ministry said.
Traffic at the Busan port, which accounts for 80% of container activity in the country, was down to a third of normal levels on Friday, Reuters reported, quoting a government official.
At the port of Ulsan – the industrial hub where much of the strike action has occurred – movement of containers has totally been suspended as of Friday morning due to the strike, according to Reuters.
Around 1,000 truckers were protesting at the main complex of Korea’s biggest automotive manufacturer Hyundai Motor in Ulsan on Friday, Reuters reported.
Hyundai operates the world’s largest integrated automobile manufacturing facility in Ulsan which has an annual production capacity of 1.6m units. The strike has halved Hyundai’s production in Ulsan.
The automotive sector is a major downstream industry for petrochemicals.
Focus article by Nurluqman Suratman
Additional reporting by Trixie Yap, Yeow Pei Lin, Hazel Goh and Julia Tan