Korea Federation of SMEs surveys 410 small and medium-sized enterprises; 36.1% say current stockpiles will last less than a month; 40% would cut output if situation persists
Seven in 10 small and medium-sized enterprises that use raw and subsidiary materials say their procurement costs have risen by at least 20% since Middle East tensions escalated, a new survey shows. With 36.1% of respondents reporting less than one month of inventory on hand, rising costs and supply uncertainty are squeezing small businesses on two fronts at once.
The Korea Federation of Small and Medium-sized Enterprises on Thursday released findings from its survey on raw and subsidiary material procurement difficulties tied to the Middle East situation, conducted from May 15 to May 31 among 410 small and medium-sized enterprises sourcing such materials.
The survey focused on companies using petrochemical feedstocks, non-ferrous metals, construction and civil engineering materials, and electrical and electronic component materials — sectors directly exposed to Middle East supply disruptions.
Asked about the impact on production activity since the Middle East situation developed, 94.6% of respondents cited higher cost burdens as the top concern. Some 80.7% also reported shortages of raw and subsidiary materials, reflecting simultaneous pressure from rising costs and constrained supply.
Compared with late February, 71.9% of respondents said average procurement prices for key raw and subsidiary materials had risen by 20% or more. Companies using packaging materials, film and paper were hit hardest: 31.4% reported price surges exceeding 80%, more than double the overall average of 15.1%.
Inventory buffers are also running thin. Some 65.9% of respondents said their current stockpiles stood below 70% of normal adequate levels, and 36.1% said they had less than one month of inventory remaining.
When asked how they would respond if Middle East tensions persist for three months or more, 39.8% said they would reduce operations. Another 54.2% selected "other," but 204 of those companies said they had no specific plan — meaning nearly half of all respondents, 49.7%, have yet to prepare a contingency for a prolonged crisis.
On government priorities, 30.0% of respondents called for stronger monitoring of raw material prices and supply conditions. That was followed by support for delivery price adjustments and price-linkage mechanisms at 23.7%, assistance finding alternative materials and import sources at 17.3%, and emergency business stabilization funding at 12.4%.
In follow-up field interviews, Company A, a film and packaging materials manufacturer, said large suppliers were unilaterally announcing price increases with no clear pricing criteria or prior consultation. The company said the price of certain feedstocks such as LLDPE had risen from 1.5 million won (about $990) per ton to 2.8 million won.
Kim Hee-joong, head of the economic policy division at the Korea Federation of Small and Medium-sized Enterprises, said small businesses were suffering a double blow — production disruptions and cash shortages — from unilateral price hikes and supply restrictions by large suppliers amid the Middle East-driven supply chain shock. "Disruptions to basic raw and subsidiary material supply, such as packaging and plastics, could ripple into production setbacks across downstream industries including food and daily consumer goods," he said.
hong@heraldcorp.com
