'Everything's going up': Small business owners squeezed by rising fuel, ingredient costs

A street in Seoul’s shopping district of Myeong-dong is crowded with visitors, March 15. Yonhap

Kim Bong-hwan, who runs a barbecue restaurant in Myeong-dong in central Seoul, is feeling the brunt of rising costs, with wholesale beef prices climbing from about 28,000 won ($18) per kilogram to more than 40,000 won in recent weeks.

"Everything's going up — beef, pork, eggs, vegetables and even disposable materials like plastic bags and containers," he said. "Prices have risen 20 to 30 percent in just a few weeks."

Kim, who has operated the restaurant for more than 15 years, said raising menu prices is a last resort as he fears losing customers.

"For now, I'm absorbing the hit to my margins," he said. "But I'm worried this is only the beginning and the worst is yet to come."

Like Kim, many small business owners across Korea are grappling with rising fuel, ingredient and packaging costs as higher global oil prices ripple through the economy amid tensions in the Middle East.

Global oil prices have surged amid the escalating conflict. U.S. West Texas Intermediate crude futures for May delivery rose 3.25 percent to $102.88 per barrel on Monday, surpassing the $100 mark on a closing basis for the first time since July 2022.

As a major energy importer, Korea is particularly vulnerable to higher oil prices, which are pushing up costs across industries, including fertilizers, animal feed, farm fuel and transportation.

The spike in packaging costs is linked to disruptions in naphtha supply, a key petrochemical feedstock derived from crude oil. Korea imports about 45 percent of its naphtha, with 77 percent coming from the Middle East.

Drivers refuel a vehicle at a gas station in Seoul, Tuesday. Yonhap

Online communities for self-employed workers are flooded with complaints about soaring packaging costs, particularly for plastic bags and food containers widely used in the country's delivery-driven market.

"One of my suppliers raised prices of food containers by 100 percent. Unbelievable. I might have to suspend my business for a while," one user wrote.

Another user said an order that previously cost 70,000 won for 600 units of plastic containers now costs 90,000 won.

Several suppliers of plastic containers and packaging materials have posted notices on their websites warning of "unavoidable price hikes" due to rising raw material costs and supply instability. Some said prices may be adjusted without prior notice once existing inventories are depleted.

Amid rising cost pressures, the Korea Federation of Micro Enterprises, a coalition of self-employed workers, called on the government Monday to designate packaging materials as essential goods for price monitoring and to crack down on unfair trade practices.

Attention is turning to whether the government's planned stimulus measures will help ease the burden on small businesses.

The government on Tuesday proposed a 26.2 trillion won supplementary budget to cushion the economic fallout from the Middle East crisis.

According to the Ministry of SMEs and Startups, 1.9 trillion won of the extra budget will be allocated to support small businesses.

The plan includes expanding emergency management stabilization funds by 320 billion won to ease liquidity strains on self-employed individuals, as well as increasing credit guarantees through additional contributions of 100 billion won each to the Korea Technology Finance Corp. and the Korea Credit Guarantee Fund.