"Middle East War Ripple Effects" Warning Lights Flashing for South Korea... Companies Complain of Damage

[Anchor]

As the war in the Middle East exceeds 7 months, disruptions are occurring in South Korea's exports as well. Unable to endure the contraction in local demand, Kia has decided to reduce production for some vehicle models exported to the Middle East.

Here is a report by Park Jaehyeon.

[Reporter]

A gas station in Iraq.

Vehicles are lined up bumper-to-bumper, filling the area around the gas station.

As various prices soar due to the war between the United States and Iran, the Middle East economy has shrunk significantly.

[Saadi Al-Hilli / Iraq Resident : We can no longer spend freely or buy what we want. We only buy groceries necessary for my family and me to survive.]

The World Trade Organization (WTO) projected that the Middle East region's GDP growth rate this year will drop by -4% and imports by 15% compared to the previous year.

High oil prices and decreased purchasing power are dealing a direct blow to South Korean companies' exports to the Middle East region.

Kia has decided to cut production of the Sorento and the pickup truck Tasman, which are popular models in the Middle East region, by 200 units per day for 5 days, totaling 1,000 units.

This is equivalent to one-fifth of the Hwaseong Plant's production volume.

As Kia's export volume of the Sorento to the Middle East up to August of this year hovered at only 60% compared to the previous year, it made its first production cut decision.

It is not just Kia.

Last month, South Korea's automobile exports produced domestically increased by 9% and 15% year-on-year to North America and Europe, respectively, but exports to the Middle East region decreased by 7%.

Soaring logistics costs are also adding to export burdens.

With risk costs from the war added, marine logistics costs heading from South Korea to the Middle East surged more than fivefold from 1,200 dollars per container in February to 6,400 dollars this month.

Some 10,000 domestic small and medium-sized enterprises (SMEs) that have exported cosmetics, used cars, and auto parts to the Middle East are complaining of damages such as soaring logistics costs and canceled contracts.

[Chang Sang-sik / Head of International Trade Research Institute, Korea International Trade Association : The difficulties are expected to be greater for SMEs that find it hard to reflect increased transportation costs into product prices. There is a need to flexibly adjust production and shipment schedules in line with local conditions....]

With the war dragging on for over 7 months and tensions in the Middle East showing little sign of easing, exporting companies are letting out deep sighs.

(Video Editing: Kim Jong-mi, Design: Kim Ye-ji)
※ Please note: This article was translated by AI and may contain errors.