(Bloomberg) -- Striking truckers in South Korea reached an agreement with the government, ending a weeklong strike that threatened the nation’s economy and added to strains on global supply chains.
Truck drivers began returning to work Wednesday morning after agreeing to extend a freight rate system that guarantees minimum wages. Under the agreement, the transport ministry will provide subsidies to alleviate pressure on surging fuel costs, according to a statement from the Cargo Truckers Solidarity division of the Korean Public Service and Transport Workers Union.
The strike, which started June 7, roiled industries amid fears of higher costs and wider upheaval to global supply chains after Covid-19 lockdowns in China and Russia’s invasion of Ukraine. The Ministry of Trade, Industry and Energy estimated this week that key industries have seen production disruptions worth about 1.6 trillion won ($1.2 billion).
Shares of some companies affected by the strike rose in early trading Wednesday. Hyundai Motor Co. climbed as much as 4.4%, while Korea Cement Co. jumped 11%. Posco Holdings Inc. and LG Chem Ltd. were little changed.
Deliveries of cars, petrochemical products, steel and materials for semiconductor chips have been suspended or delayed, and concerns grew that a prolonged strike would force bigger production shutdowns and even put the nation’s energy security at risk.
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Posco, the nation’s top steelmaker, suspended output at its four wire-rod factories and a cold-rolled steel plant after the strike exhausted warehouse space. Petrochemical producers also saw warehouses fill up, as they were unable to deliver raw materials used to make everything from clothing to cars.
The daily volume of container boxes transported to and from the nation’s 12 ports dropped 53% on Tuesday compared with the average for May, according to data from the transport ministry. Inbound and outbound volumes at Busan, the world’s seventh-busiest port, were about half their usual amount.
LG Chem, Kumho Petrochemical Co. and Hanwha Totalenergies Petrochemical Co. said they expect deliveries to resume Wednesday and production to normalize gradually.
The strike presented one of the first economic challenges to newly elected President Yoon Suk Yeol, putting to the test his desire to have less state intervention in labor disputes.
“We’re still on pins and needles. It’s like we’re walking on thin ice, as we face high inflation and economic crisis,” Yoon said Wednesday. “I think we should all put our community as a whole first and comply with it.”
The union was demanding the extension of the freight rate system to help drivers cope with rising fuel prices. The transport ministry said in a separate statement it will consider expanding the freight rate system, which currently applies to shipments of containers and cement, to other items.
The Safe Trucking Freight Rates System was introduced in 2020 for a three-year run, aimed at preventing dangerous-driving practices, such as cargo overload, and guaranteeing minimum rates for truckers. The system was due to expire this year.
(Adds share moves in fifth paragraph and Yoon comment in 11th paragraph.)
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