South Korea factories face record price surge as ME conflict shatters supply chains
Both input costs and selling prices hit highest levels in survey's 22-year history
South Korean manufacturers recorded unprecedented price pressures last month as the war in the Middle East drove raw material costs and output charges to the highest levels ever measured in the survey's 22-year history — even as production and orders continued to expand, partly on the back of precautionary stockpiling.
The S&P Global South Korea Manufacturing PMI rose to 53.6 in April from 52.6 in March, the strongest reading since February 2022 and a solid indicator of improving conditions across the sector. But the headline figure was overshadowed by the scale of inflationary pressure building beneath it.
Input price inflation surged to a series record high, driven by sharply rising costs for raw materials — with oil and fuel singled out as particularly acute — compounded by delivery delays and supply shortages linked directly to the Middle East conflict. Firms passed the burden on almost entirely: output charges also rose at the fastest pace since the survey began in April 2004, likewise a record high.
Delivery times deteriorated to their worst level since June 2022, as the war disrupted the timely movement of raw materials into South Korean factories. Purchasing activity rose for the fifth consecutive month as manufacturers attempted to get ahead of further expected price rises and delays, yet supply disruption meant that stocks of purchased inputs fell for the fifth time in six months.
Output volumes grew at the steepest pace in 20 months, though analysts noted that inventory-building played a meaningful role alongside genuine demand. New orders rose at the fastest rate since February 2022, with firms citing new product launches as a key driver — but also acknowledging that some clients were placing additional orders to build safety stocks against future shortfalls. Export orders grew modestly, with some manufacturers noting that easing concerns over United States tariffs had aided demand from certain markets.
Despite the production surge, finished goods inventories fell at the fastest rate this year, as difficulties securing materials meant that stock depletion outpaced replenishment efforts.
On the labour market, manufacturers added workers for the second month in succession, encouraged by the positive demand outlook and higher capacity requirements. Backlogs of unfinished work rose for the fourth consecutive month, pointing to sustained pressure on existing capacity.
Business confidence, while remaining broadly positive, slipped to its weakest level in five months. Firms cited uncertainty over how long the Middle East conflict might last and what its continued effect on prices and supply chains might be.
Usamah Bhatti, economist at S&P Global Market Intelligence, said the April data illustrated the war's most direct and damaging impact on South Korean industry. "The largest impact was seen on the price front, where surging raw material prices pushed input cost inflation to the highest since the series began 22 years ago," he said. He cautioned that the degree to which stockpiling had artificially inflated output and demand figures remained an open question: "How sales and output develop once this effect wears off over time will be central to the health of the sector in the months ahead."
