[Korea Federation of SMEs]
[Korea Federation of SMEs]

Korea Federation of SMEs surveys 410 firms on raw material supply

36.1% say current stockpiles won't last a month

Nearly 40% would cut output if crisis persists three months

Seven in 10 small and medium-sized enterprises that rely on raw materials have seen procurement costs rise more than 20% since Middle East tensions escalated, a new survey shows. With 36.1% of respondents holding less than one month of inventory, rising costs and supply uncertainty are squeezing small businesses on two fronts at once.

The Korea Federation of SMEs on Monday released findings from its "Survey on Raw Material Supply Difficulties for SMEs Related to the Middle East Situation," conducted May 15–31 among 410 small and medium-sized enterprises that procure raw and subsidiary materials.

The survey focused on companies using petrochemical feedstocks, non-ferrous metals, construction and civil engineering materials, and electrical and electronic component materials — sectors directly exposed to Middle East supply disruptions.

Asked how Middle East instability has affected their operations, 94.6% of respondents cited higher cost burdens as the leading impact, while 80.7% reported shortages of raw and subsidiary materials. The results underscore that cost pressures and supply constraints are hitting simultaneously.

Compared with late February, 71.9% of respondents said average procurement prices for key raw materials had risen more than 20%. Companies using packaging materials, film and paper were hit hardest: 31.4% reported price surges exceeding 80%, more than double the overall average of 15.1%.

Inventory buffers are also running thin. Some 65.9% of respondents said their current stockpiles stand below 70% of normal operating levels, and 36.1% said existing inventory would not sustain operations for even one month.

When asked how they would respond if the situation persists for three months or more, 39.8% said they would reduce output. Another 54.2% selected "other," but 204 of those companies said they had no contingency plan — meaning 49.7% of all respondents have yet to prepare for a prolonged crisis.

On government priorities, 30.0% of respondents called for stronger monitoring of raw material prices and supply conditions. That was followed by support for delivery-price adjustments and price-linkage mechanisms at 23.7%, assistance finding alternative materials and import sources at 17.3%, and emergency business stabilization funding at 12.4%.

Field interviews conducted after the survey surfaced frustration over unilateral price hikes and supply restrictions by large corporate suppliers. Company A, a film and packaging manufacturer, said major suppliers were imposing price increases without clear pricing criteria or prior consultation. "The price of certain feedstocks such as LLDPE has jumped from 1.5 million won ($993) to 2.8 million won per ton," the company said.

Kim Hui-jung, head of the federation's economic policy division, said small businesses are suffering a double blow — production disruptions and cash-flow difficulties — as large suppliers unilaterally raise prices and restrict supply amid the Middle East-driven supply chain shock. "Disruptions in basic raw materials such as packaging and plastics could ripple into downstream industries including food and daily consumer goods," he said.


hong@heraldcorp.com