17 June 2024 (Lloyd's List) - THE South Korean government is intervening to aid domestic exporters facing soaring shipping rates and capacity shortfalls, as the fallout from the Red Sea crisis crimps supply chains.
The Ministry of Trade, Industry and Energy (MOTIE) said it would offer three ad-hoc containerships with a total capacity of 9,000 teu through its national carrier HMM for busy destinations including the US East and West Coasts and the Middle East in June-July.
More vessels will be deployed in the second half of this year, including five 13,000 teu ships for the South Korea-US West Coast route and a pair of 1,800 teu ships to Southeast Asia.
The ministry said it would also supply vessels exclusively for use by small and medium enterprises, with 1,685 teu capacity per voyage.
The move comes as the ripple effect from the Red Sea disruptions has led to similar congestion at ports as was seen during the Covid pandemic, soaking up capacity and pushing rates higher.
Last Friday, the Shanghai Containerized Freight Index rose another 6%, indicating that strong demand continues to exceed supply constrained by rerouting. Analysts expect these conditions to persist, with no end to the Red Sea crisis in sight.
MOTIE said: “Although the direct impact of rising shipping costs on export cargo loading is limited, rerouting around the Cape of Good Hope and resulting transport delays are increasing costs for exporters.”
In addition to providing extra capacity, the government will bring forward Won 20.2bn ($15m) worth of export voucher budgets originally scheduled for the second half of 2024, while considering further assistance measures for future rate increases.
“The scope and time window of support will be extended as well, granting exporters preferential limits on export credit guarantees and prompt insurance payouts,” the ministry said.
Moreover, a 700 teu public container yard will be installed around Busan New Port, offering below-market rates.
The intervention is reminiscent of similar measures South Korea took during the Covid pandemic, when logistics bottlenecks and port congestion triggered sharp increases in rates and severe delays to sailings.
At the time, working with national carriers, Seoul deployed 49 existing containerships totalling 133,000 teu on international trades for a year starting August 2020, plus eight 16,000 teu newbuildings over the same period.
In 2021, Won26.3bn was allocated to provide financial assistance to SMEs affected by rising ocean and air freight costs.
