Middle East crisis deals blow to Seoul's small manufacturers

Small manufacturers are clustered in Jung District, central Seoul, Tuesday. Korea Times photo by Park Ung

When the United States and Israel attacked Iran in late February, Jeong In-sun, who works at a small plastics manufacturer in central Seoul's Euljiro area, did not immediately realize that the war would reach her workshop.

“The outer casings of clocks are made from plastic injection pellets, and since the Middle East crisis started, the prices of those materials have more than doubled,” the 60-year-old told The Korea Times Monday.

Jeong's case illustrates how Korea's small manufacturers have taken a direct hit as the Middle East conflict chokes shipping routes through the Strait of Hormuz, disrupting supplies of key materials and driving up costs across the board.

Tensions in the Middle East see no signs of easing despite a two-week ceasefire agreement, with a peace deal seeming elusive for now. “If this situation continues, we may have to suspend operations for the foreseeable future,” Jeong said.

The crisis has placed small manufacturers like Jeong in a dilemma: Should they raise the prices of their products? Jeong said it is not a straightforward choice.

“If we double our prices overnight, orders will dry up. For a manufacturer like ours, there's really nothing we can do.”

Clocks made at Jeong In-sun's plastics manufacturer sit on display in Jung District, central Seoul, Monday. Korea Times photo by Park Ung

Hyeon Ji-man, a 53-year-old printing industry worker, is weighing whether to raise the prices of his services after a supplier hiked coated paper costs by 10 percent in late March, citing surging crude oil prices and exchange rates.

“If the costs go up, the whole industry should be raising prices together. But orders are so scarce that businesses large enough to absorb the competition are rather cutting prices,” Hyeon said, adding that in his 25 years of experience, costs rarely come back down once they rise.

Shin Eun-ji, 41, who runs a plaque and trophy shop, also said, “Prices of acrylic — the main material for plaques — have risen about 20 percent in the past few weeks. But you can't pass that straight on to customers. Even a 1,000 won ($0.67) increase drives customers away.”

Printing businesses in Jung District, central Seoul, Tuesday / Korea Times photo by Park Ung

While manufacturers bear the brunt, restaurants have been less affected — so far — because most have yet to receive higher gas bills. But many worry the crisis will further dampen an already sluggish economy.

Lee Ung-hui, a chef at a gomtang (beef bone soup) restaurant, said costs had yet to rise, but the drop in customer numbers was already taking its toll.

“Consumers are already feeling the pinch from surging fuel costs,” the 38-year-old said, adding that the number of evening and weekend customers has fallen by about 30 percent. Lee said gas bills may rise next month.

Moon, a 74-year-old street vendor selling hotteok (Korean sweet pancakes), said the price of one canister of liquefied petroleum gas, which she goes through about once every five days, rose from 51,000 won to 52,000 won last week.

“Suppliers say it'll go up more, but whether gas prices rise or not, I still have to use it anyway,” Moon said, adding that her business was already slow before the Middle East crisis and she worried it would only get worse.

“People aren't eating out as often. And now this on top of it all,” she added.