President Donald Trump has intensified pressure on Iran regarding negotiations, raising concerns that Samsung Electronics and LG Electronics may face prolonged logistics costs in the second half of the year. LG Electronics had previously expected shipping costs to peak in the third quarter, with a decline anticipated in the fourth quarter. However, renewed tensions in the Middle East surrounding the Strait of Hormuz could lead to sustained surcharges and war risk insurance premiums.
According to industry sources, Trump mentioned the possibility of negotiations with Iran during a White House briefing on August 3, calling it a "last chance to sign a good agreement." Reports indicate that he also referenced the potential for large-scale airstrikes, further pressuring Iran.
Uncertainties remain regarding the full opening of the Strait of Hormuz and denuclearization talks. Iran has reportedly denied U.S. claims that formal negotiations are ongoing. No agreement has yet been reached to stabilize the Strait of Hormuz.
The home appliance industry views the Middle East risks as a variable affecting logistics costs. Large products such as TVs, refrigerators, and washing machines rely more on maritime transport than air freight. If shipping routes are altered or insurance premiums rise, the transportation costs for finished products will increase accordingly.
LG Electronics has already projected that its logistics costs in the second half of the year will be higher than in the first half. During a conference call on July 30, the company reported that the container shipping index has risen due to the combination of Middle Eastern conflicts and increased cargo volumes from China. They also noted that shipping companies have requested higher rates during the bidding process for the second half.
LG expects shipping costs to peak in the third quarter, with a potential decline in the fourth quarter due to increased supply capacity, a slowdown in global cargo volumes, and the effects of renegotiations with shipping companies. However, this outlook is contingent on the Middle Eastern situation not deteriorating further.
Industry observers are noting the increased uncertainty surrounding negotiations with Iran following Trump's comments. In a situation where the possibility of airstrikes has not been completely ruled out, shipping companies may find it difficult to lower costs for operations in high-risk areas. If war risk insurance premiums and emergency surcharges remain in place, LG's anticipated stabilization of shipping costs in the fourth quarter could be delayed.
Samsung Electronics is also directly affected. The company has not disclosed the current additional shipping costs related to the Strait of Hormuz situation. However, due to the larger volume of products like TVs and home appliances, the reliance on maritime transport is significant. Rising shipping costs may first impact the cost burden of finished goods rather than its MX or DS divisions.
Past incidents in the Red Sea have shown that logistics costs can become a significant variable in performance. In 2024, Samsung's annual logistics costs rose to 2.96 trillion won, a 71.9% increase from 1.72 trillion won the previous year. Similarly, LG's logistics costs increased from 2.66 trillion won to 3.11 trillion won, reflecting the impact of regional instability, rerouted shipping, and rising maritime freight rates.
This time, the Strait of Hormuz is the variable. While it is primarily known as a route for oil transport, it also contributes to the overall risk premium in the maritime logistics market. If shipping companies reduce operations in high-risk areas or reroute, shipping capacity may become constrained. Increased insurance premiums and surcharges could also worsen the shipping contract conditions for electronics companies.
Both Samsung and LG have been working to reduce logistics costs through long-term shipping contracts, renegotiations with shipping companies, and improving inland transport efficiency. LG also stated during the conference call that it aims to minimize the burden of rising logistics costs by improving basic freight conditions, enhancing inland transport structures, and optimizing warehouse operations.
Meanwhile, the outcome of negotiations in the Middle East is expected to be a turning point for shipping trends in the third quarter. Although Trump has left the door open for negotiations by postponing airstrikes, analysts suggest that the risk premium in the maritime logistics market is unlikely to decrease easily until an agreement with Iran is confirmed.
An industry insider remarked, "Home appliances are items with high sensitivity to logistics costs relative to product prices. If tensions in the Strait of Hormuz persist, shipping companies will find it difficult to lower rates, and manufacturers may face increased cost management burdens in the second half of the year."
* This article has been translated by AI.
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