[Anchor]

As the Middle East war surpasses seven months, South Korea's exports are also experiencing disruptions. Unable to withstand the contraction in local demand, Kia has decided to cut production of some vehicle models exported to the Middle East.

Here is a report by reporter Park Jaehyeon.

[Reporter]

A gas station in Iraq.

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

With soaring prices of various goods driven by the US-Iran war, the Middle East economy has contracted significantly.

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

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

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

Kia has decided to reduce the production of the Sorento and the pickup truck Tasman—both popular models in the Middle East—by 200 units per day for five days, totaling 1,000 units.

This accounts for one-fifth of the Hwaseong plant's production volume.

This marks Kia's first decision to cut production as the company's Middle East export volume for the Sorento through August of this year hovered at only 60% of last year's level.

Kia is not alone.

Last month, while South Korea's automobile exports to North America and Europe increased by 9% and 15% respectively compared to last year, exports to the Middle East decreased by 7%.

Soaring logistics costs are also adding to the export burden.

With war-related risk premiums added, maritime shipping costs from South Korea to the Middle East surged more than fivefold, rising from 1,200 dollars per container last February to 6,400 dollars this month.

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

[Chang Sang-sik / Head of Trend Analysis Research Institute, Korea International Trade Association: Small and medium-sized enterprises, which find it difficult to reflect increased transportation costs in product prices, are expected to face even greater hardships. There is a need to flexibly adjust production and shipping schedules in response to local conditions...]

As the war drags on for over seven months with no sign of easing tensions in the Middle East, export companies are letting out deeper sighs.

(Video Editing: Kim Jong-mi, Design: Kim Ye-ji)