South China Sea emerges as another supply chain flashpoint for Korea

As tensions over the Strait of Hormuz persist, the South China Sea and Taiwan Strait have been identified as additional vulnerable points in Korea's maritime supply chains. Analysts warn that armed conflict or passage restrictions in the Taiwan Strait could simultaneously disrupt supplies of crude oil and LNG as well as semiconductors, electronics and machinery.

According to the Korea Maritime Institute's July international maritime situation research note released Tuesday, the Strait of Hormuz crisis has demonstrated how the paralysis of a single shipping lane can send shockwaves through global energy and raw materials supply chains and the broader world economy. The KMI said Korea must also prepare for the possibility that similar maritime supply chain risks could materialize in the South China Sea and Taiwan Strait, given that a significant share of Korea's trade and energy shipments depends on those waterways.

The South China Sea is a strategic hub where major global shipping lanes converge, including the Strait of Malacca, the Taiwan Strait, the Luzon Strait, the Sunda Strait, the Lombok Strait and the Makassar Strait. According to the Center for Strategic and International Studies (CSIS), cited in the report, trade passing through these key straits totaled approximately $6.4 trillion in 2024, including overlapping counts. Of that, trade through the Strait of Malacca and the Taiwan Strait each exceeded $2.4 trillion, together accounting for about 21 percent of global maritime trade.

Korea's dependence on these routes is considerable. About 22 percent of the country's total trade passes through the Taiwan Strait and 13 percent through the Strait of Malacca. Energy imports are particularly concentrated on these routes — more than 64 percent of imports through the Taiwan Strait and more than 78 percent of imports through the Strait of Malacca consist of oil, gas and other energy products. Even a restriction on passage through just one of the two straits could cause significant disruptions to domestic energy supply and manufacturing output.

The Taiwan Strait is also a critical corridor for advanced industry supply chains. Last year, trade in electronics and machinery passing through the Taiwan Strait totaled approximately $986 billion, accounting for about 40 percent of the strait's total trade volume. While the Hormuz crisis directly affected international oil prices and energy procurement, a Taiwan Strait crisis could simultaneously shake not only energy but also semiconductor, intermediate goods and finished product supply chains, the report said.

If passage through the Taiwan Strait were restricted, Korean vessels would need to reroute through the Luzon Strait and into waters east of Taiwan. The longer sailing distance would increase shipping times and logistics costs, and the supply chain shock would likely extend beyond higher energy prices to rising manufacturing costs and weakened export competitiveness.

The report identified three scenarios that could threaten Korea's maritime shipping lanes in the South China Sea: armed conflict over Taiwan, a military expansion of South China Sea territorial disputes, and the imposition of transit fees or selective passage controls by coastal states. Of the three, the report assessed that armed conflict over Taiwan would most likely have the greatest impact on the Korean economy.

The report also projected that even if China were to implement a "quarantine" measure — a step below a full blockade — significant disruptions to vessel passage could still occur. A quarantine led by law enforcement agencies such as the coast guard falls short of a military blockade but could effectively restrict the movement of ships and cargo, leading to supply chain disruptions.

The report said international law alone has limits in protecting shipping lanes during a crisis. While the UN Convention on the Law of the Sea guarantees the right of transit passage through straits used for international navigation, legal rights alone would be insufficient to secure actual sea routes if a particular state deployed military force or selectively restricted passage.

Kim So-yeon, a senior researcher at the KMI, said in the report that "legal rights alone cannot guarantee practical protection of maritime shipping lanes in a crisis situation," and recommended that Korea "reestablish maritime lane security as a core pillar of national security strategy and gradually expand international cooperation, starting with non-traditional security areas such as anti-piracy operations, disaster response and search and rescue, rather than politically and militarily sensitive domains."