Hyundai Motor flags export disruptions as Middle East conflict hits shipping

By Daewoung Kim

PYEONGTAEK, South Korea, April 3 (Reuters) - Hyundai Motor 005380.KS said on Friday that exports to Europe and North Africa, which typically transit through the Middle East, were being disrupted by the conflict in the region, underscoring growing strains on global supply chains.

The disruption highlights how the conflict is choking key shipping routes, driving up logistics costs, delaying deliveries and adding pressure on the automaker and its suppliers.

Hyundai Motor, the world's third-biggest automaker by sales with its affiliate Kia Corp 000270.KS, warned that even if the Iran war ended soon the impact would linger. Kim Dong-jo, a senior vice president at Hyundai Motor's Global Policy Office, said rebuilding supply chains would take time.

"Even if the conflict ends, it will take a considerable amount of time to rebuild and restore existing supply chains," said Kim, who was speaking at Pyeongtaek-Dangjin Port, southwest of the capital Seoul, where government officials, logistics firms and automakers met to assess the impact of the war.

The meeting took place at the port where cars were lined up on the wharf to be shipped on a giant vehicle carrier, set to carry about 4,900 vehicles and bound for the U.S. west coast.

Kim said rising logistics costs and raw material constraints linked to the conflict were also pressuring parts suppliers and production, adding that Hyundai was working with suppliers and the government to minimise disruption.

Hyundai Motor Group's logistics unit, Hyundai Glovis 086280.KS, said it was currently unable to access some Middle East routes, forcing it to temporarily store cargo at alternative locations until conditions stabilise.

The company said that while routes to North America's west and east coasts have not been significantly affected so far, restricted access to the Middle East and higher fuel costs were hampering operations and efficiency.

South Korea's Trade Minister Yeo Han-koo told the gathering that some shipments were being diverted to intermediate hubs such as Sri Lanka, where they are being held while companies reassess when transport can resume.

Last month, Reuters reported that some used car exports from Japan were unable to enter Sri Lanka as ports became congested with cargo diverted from Dubai amid the Middle East conflict.

South Korea's exports in March posted their strongest growth in nearly four decades, but shipments to the Middle East fell 49%. Auto exports were little changed, as supply disruptions offset strong demand for environmentally friendly vehicles.

Hyundai Motor said on Thursday it sold 358,759 vehicles globally in March, down 2.3% from a year earlier, with domestic sales falling 2.0% and overseas sales declining 2.4%.

Shares of Hyundai Motor and Hyundai Glovis closed down 1.2% and 0.7%, respectively, on Friday versus benchmark KOSPI's .KS11 2.7% rise.