Plastic suppliers see W20b price hike after mutual-growth pact, ministry says

Delivery prices paid to small plastic-industry suppliers rose by about 20 billion won ($13.3 million) following a mutual-growth agreement between the plastic sector and major corporate buyers, the Ministry of SMEs and Startups said.

The ministry said Tuesday it confirmed the results after reviewing compliance with the pact — signed in April between plastic industry groups and large and mid-sized buyer companies — covering the period from April 9 through June 30. The review was conducted from June 25 to July 3.

Nine buyer companies that participated in the agreement were subject to the compliance check.

The pact was signed under the auspices of the National Assembly's Eulji-ro Committee, bringing together the government, the Korea Plastics Industry Cooperative, the Korea Plastic Packaging Container Association and corporate buyers including CJ CheilJedang, Daesang, Nongshim, Lotte Chilsung, LG Household, Sangmidang Holdings, Starbucks Korea, GS Retail and the Nonghyup Economic Holdings' agricultural materials division. The agreement centered on adjusting delivery prices and easing delivery deadline burdens in response to rising raw material costs.

The review found that the nine buyer companies raised delivery prices by a combined 20 billion won for 394 small and medium-sized supplier firms struggling with higher raw material costs.

Three of the buyer companies made early payments totaling 14.97 billion won within 10 days, easing cash-flow pressure on their suppliers. Another three companies extended delivery deadlines by an average of 7.9 days and waived penalties across 54 cases, reducing the burden on suppliers.

Some companies improved their trading practices by signing new price-linkage agreements or shortening price negotiation cycles so that raw material cost changes could be reflected in delivery prices more quickly. The review also identified cooperative initiatives including low-interest financing through a mutual-growth fund, joint raw material sourcing and quality testing support.

The ministry said the review was significant as the first comprehensive government assessment of cases in which large companies and small suppliers voluntarily improved trading terms during a period of rising raw material costs. The ministry plans to link its delivery price indexing system with voluntary agreements to create a trading environment where rising cost burdens are not passed unilaterally onto small supplier firms.

"We will continue working to build a trading environment where small and medium-sized enterprises receive fair prices for their deliveries, so that large, mid-sized and small companies can grow together," said Lee Eun-cheong, director general for mutual-growth cooperation policy at the ministry.