Strikes at Korea’s global shipping giant threaten supply chain ‘turmoil’
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One of Asia’s biggest shipping companies is facing the threat of imminent worker strikes, risking further disruption to global supply chains that are already battling surging costs and shortages of containers and computer chips.
South Korea-based HMM will hold talks on Wednesday afternoon with the company’s labour union about raising wages after sailors and dockworkers voted in favour of a strike last month, demanding sharp pay rises as the group’s profits soared.
Analysts said a strike would likely cause further disruption to global tech and auto supply chains, which have been strained by material and parts shortages as well as bottlenecks at ports because of coronavirus-related restrictions and staffing shortfalls.
“If they actually go on strike, it will create knock-on effects on international shipping,” said Uhm Kyung-ah, an analyst at Shinyoung Securities.
HMM’s management has proposed an 8 per cent pay increase and a bonus of six months’ salary, but the union refused the offer.
A spokesperson for HMM said that workers were “demanding the company normalise their pay while the company wants to gradually increase the pay level”, conceding that wages had not increased in the past eight years.
HMM believed the chances of a strike were low and management hoped it could reach an agreement with the union on Wednesday “to avoid turmoil in ocean shipping”.
Supply chains remain vulnerable to even small disruptions. Closures at Chinese ports this year hit international trade, with shipping gridlock set to prolong supply chain tumult into next year.
HMM estimated that a three-week strike would result in about $580m of operating losses for the company and other shippers with which it has formed alliances.
Global shortages of raw materials and freight capacity have also led to weaker industrial activity in South Korea and some of its trading partners.
South Korea’s factory activity growth slowed in August for the first time in a year as demand for important exports such as semiconductors rose at a slower pace as the highly infectious Delta coronavirus variant spread around the world.
The country’s seasonally adjusted purchasing managers’ index fell from 53.0 in July to 51.2 in August, or just above the 50 mark that separates expansion from contraction, according to IHS Markit.
Although South Korean manufacturers expect the supply chain situation to improve once the pandemic recedes, Asian exporters are racing to secure shipping capacity as logistics groups grapple with container shortages and a lack of berths at ports.
Container shipping groups are enjoying unprecedented profits as surging demand for goods prompted higher freight rates from the second half of last year.
HMM reported a record operating profit of Won2.4tn ($2.1bn) in the first half, compared with Won136.7bn a year earlier. Its revenues almost doubled to Won5.3tn in the same period.
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