South Korea's food industry has requested expanded government policy support as the prolonged Middle East war drives up costs for raw materials, packaging, and logistics.
The Korea Food Industry Association said Friday that it held a "food industry meeting to respond to the prolonged Middle East war" on June 10, attended by officials from the Ministry of Agriculture, Food and Rural Affairs and major food companies including CJ CheilJedang, Nongshim, and Daesang.
Industry representatives agreed that the overall business environment is deteriorating, as high oil prices and a high exchange rate stemming from the prolonged Middle East war combine with rising logistics costs and a domestic consumption slump. They explained that concerns over cost burdens and worsening profitability are growing in particular due to rising prices for packaging, energy, logistics, and raw materials.
According to the association, the supply of naphtha, a key raw material for packaging, fell to about 70 percent of normal levels in March and April immediately after the Middle East war, before recovering to 85 to 90 percent this month. However, packaging prices remain high, continuing to weigh on the industry. Rising maritime freight rates and increased exchange rate volatility were also cited as burdens.
Difficulties varied by sector. The beverage industry stressed that cost burdens have risen sharply due to higher prices for key packaging materials such as aluminum cans and PET bottles, along with a rising exchange rate. It explained that, because packaging accounts for a large share of beverage products, cost increases directly affect performance.
The instant noodle industry said that rising prices for oils such as palm oil and soybean oil, along with increasing packaging costs, are continuing. It appealed that, while cost-increase factors are accumulating, raising product prices is difficult given the burden on consumer prices, adding to management strain.
The industry projected that improving the business environment will remain difficult in the second half and requested expanded government support. Specifically, it proposed support for responding to country-specific certifications and regulations, the establishment of a K-Food certification system, expansion of export vouchers, support for participation in overseas trade fairs, and expanded logistics cost support. It also requested that the government consider a temporary increase in the deemed input tax deduction rate and limit for the food manufacturing and processing industry.
The Ministry of Agriculture, Food and Rural Affairs said it plans to continuously monitor the supply situation for raw materials and packaging and to strengthen policy support for expanding exports and enhancing industry competitiveness. It also said it would continue communicating with the food industry, gather views from the field, and cooperate with relevant ministries to prepare necessary support measures.
