Asia

South Korea faces ‘unprecedented’ supply chain chaos from spread of coronavirus

South Korea is grappling with supply chain chaos not seen since Hanjin Shipping collapsed four years ago.

The escalation of the coronavirus in South Korea has caused major burdens on many industries in the country, including manufacturing, shipping, ports and shipyards.

South Korea has raised its alert status to the highest level after it became the most coronavirus-hit country outside of China with the total number of infected people now standing at more than 5,200.

An official at the Korea Shipping Association told Splash today that the supply chain disruptions in the country brought by the outbreak of coronavirus would be “unprecedented” if more manufacturers decide to suspend operations as numbers of people getting ill continue to rise.

South Korean tech conglomerates Samsung Electronics and LG, and automobile giant Hyundai Motor have all been hit by the coronavirus.

Samsung Electronics has shut one of its mobile device factories in South Korea after a worker tested positive for the coronavirus, while LG temporarily closed its Innotek factory that supplies iPhone camera modules in Gumi, and Hyundai Motor suspended production at one of its factories in Ulsan also citing the virus. Accessing parts from China has also hindered many manufacturers in the east Asian nation.

Ulsan is less than an hour from Daegu, the epicentre of outbreak in Korea. It is also home to Hyundai Heavy Industries (HHI), one of the largest shipyards in the world.

When contacted by Splash, an official at Hyundai Mipo, part of the HHI empire in Ulsan, said operations at the yard are currently normal and the shipyard has taken several measures for epidemic prevention and control.

Another two major South Korean shipyards, Samsung Heavy Industries and Daewoo Shipbuilding & Marine Engineering (DSME), are in discussions with authorities in Geoje island for possible solutions to minimise the damages for the shipyards as their production efficiency has been compromised by the epidemic prevention and control measures.

The South Korean government is now proposing an extra budget of KRW11.7trn ($9.8bn) to revitalise the economy amid the outbreak of coronavirus. The extra budget bill will be submitted to the National Assembly for approval on Thursday, and it is the country’s largest-ever supplementary budget bill to handle the fallout from a contagious disease.

This week, South Korea’s Ministry of Oceans and Fisheries decided to roll out financial measures to support domestic shipping firms as the escalation of coronavirus places increasing financial pressure on the industry including its many intra-Asian containerlines. The government will provide around KRW90bn ($76m) in low interest loans to local shipping firms and each firm can apply for up to KRW5bn.

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Jason Jiang

Jason is one of the most prolific writers on the diverse China shipping & logistics industry and his access to the major maritime players with business in China has proved an invaluable source of exclusives. Having been working at Asia Shipping Media since inception, Jason is the chief correspondent of Splash and associate editor of Maritime CEO magazine. Previously he had written for a host of titles including Supply Chain Asia, Cargo Facts and Air Cargo Week.
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