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Supply Chain

South Korea truckers go on strike again, supply chain at risk

Soaring fuel costs prompt unionized drivers into 2nd major walkout in 6 months

A member of the Cargo Truckers Solidarity union stands next to a liquified natural gas truck in Ulsan, South Korea on June 10.   © Reuters

UIWANG, South Korea (Reuters) -- Unionized truckers in South Korea kicked off their second major strike in less than six months on Thursday, threatening to disrupt manufacturing and fuel supplies for industries from autos to petrochemicals in the world's 10th-largest economy.

With fuel costs soaring, the truckers are calling on the government to make permanent a minimum-pay system known as the 'Safe Freight Rate' that is due to expire by the end of the year, and to expand benefits for truckers in other industries, including oil tankers.

The government has said it will extend the scheme for three years but rejected other union demands. In June, an eight-day, non-violent strike by truckers delayed cargo shipments across Asia's fourth-largest economy, costing more than $1.2 billion in lost output and unmet deliveries before it ended with each side claiming it won concessions.

The organizing union kicked off 16 rallies across the country on Thursday morning, including at a port in Ulsan that houses Hyundai Motor's 005380.KS main manufacturing plant. The union estimated some 22,000 took part in the rallies, while the transport ministry said about 9,600 people attended, and there were no clashes with police monitoring events.

In the morning before a rally in transport hub Uiwang, in Gyeonggi province, striking truckers were seen by a Reuters' eyewitness eating cup noodles and drinking soju, a Korean distilled spirit traditionally made from rice. Union officials said about a thousand truckers gathered at the rally.

The truckers chanted, "We stop, the world will stop!" and "Let's stop driving to change the world!".

At Busan, South Korea's biggest port, police officers and buses were seen lined up along key routes.

Lead organiser the Cargo Truckers Solidarity Union (CTSU) has warned the strike could stop oil supplies at major refineries and transport at major ports and industrial plants. The union has said almost all of CTSU's 25,000 members, about 6% of the country's truck drivers, will take part in the strike, joined by an unspecified number of non-union members.

"We have no choice but to stop all logistics in Korea," said Lee Bong-ju, head of the union, on Thursday.

Earlier this week, Transport Minister Won Hee-ryong said the Safe Freight Rate system had not been proven to improve the safety of truckers but to only raise their incomes, a reason why the government has refused to expand the scope of the scheme.

"The government and the ruling party misled, and openly defended capital saying that truckers' income levels were not low - and that if the Safe Freight Rate system were expanded, prices could rise due to increased logistics costs," Lee said.

The union is asking the government to ensure big businesses are held accountable if they violate the minimum wages rule.

"Frontline truck drivers should not be sympathetic to unjustified collective action. We will strictly crack down on truck drivers' obstruction with the police so that safe transportation can be ensured," Transport Minister Won said in a statement on Thursday.

Industry giants including Hyundai Motor and steelmaker POSCO 005490.KS were forced to cut output by the June strike, and POSCO has warned that fresh action could slow repair works at a major plant hit by floods this summer.

"If the cargo union strike continues, it will put too much of a burden on not only major industries, but also people's livelihoods and the national economy as a whole," said Prime Minister Han Duck-soo on Thursday.

Companies such as Hyundai Steel Co 004020.KS said because the strike was expected, urgent contract volumes were shipped out and necessary raw materials were prepared in advance. However, limits in storage space and logistics would make the strike problematic if it lasted.

A Hyundai Steel spokesperson said its daily shipment of about 8,000 tonnes of steel products at its Pohang factory could not be moved at all on Thursday due to the strike.

The government is deploying alternatives such as military-run container transport vehicles for urgent transport, and considering securing more storage space in case cargoes pile up. Some industry officials noted that military vehicles may not be equipped to carry products such as steel or fresh produce.

The Korea Oil Station Association is asking gas station owners to secure enough inventory ahead of the strike, an association official said earlier, while charging stations for hydrogen-powered cars have put up signs warning that supply could be cut.

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