By Cynthia Kim & Jihoon Lee

SEOUL (Reuters – For a decade and a quarter, Mr Lee’s Diner in Seoul has refused to raise prices.

Now, however, Mr Lee states that Indonesia’s oil export ban has been severed and prices are rising. Lee expects to keep following the larger South Korea-based “chimaek” restaurants, even if it means losing his customers.

This dilemma by Mr Lee is a reminder of the difficult path ahead for policymakers at Asia’s fourth-largest country. In Asia, worries about cost-push inflation have prompted surprise rate increases this month. Both inflation rates and expectations are now at their highest levels in over ten years.

Indonesia’s shock ban on palm oil exports has caused panic worldwide. It is now used in a variety of products, including cosmetics and croissants.

Ottogi (a large South Korean manufacturer of frozen pizza and noodles) stated that it is monitoring the situation closely. “The demand for Malay Palm Oil could rise and could cause higher prices.”

Indonesia is the largest source of palm oil in the world and has extended its ban on exports to include oil products. This was a result of the chaos caused by the conflict in Ukraine, which had already reduced supplies of sunflower oil.

Following Wednesday’s announcement by the Malaysian government, palm oil futures prices in Malaysia rose to 10% per day and have risen nearly 50% over the previous year. Soyoil prices reached an all-time high on the Chicago Board of Trade.

A steady rise in global oil prices has nearly doubled the cost of an 18-litre container in South Korea’s edible oil market since last year.

For fear of being noticed, Mr Lee, the owner of the Chimaek Diner, said that everything has increased, including this oil box which doubled in size, and flour coating. A local government office awarded him a Customer Service Award for his steady price record.

We haven’t raised prices but we are finding it really difficult now so we must raise them a little.

Genesis BBQ, one of the country’s biggest fried chicken chains, last week said it would raise prices for most items on its menu for the first time in four years by 10%, after similar moves by rivals Kyochon F&B and BHC.

It set the scene for other hikes in local shops such as Mr Lee’s which charge 8,000 won ($6.40 for a whole bird). Chickens from larger chains can be purchased for as much as 20,000 won.

The price effect of the palm oil squeeze will not be restricted to chicken.

South Korea imported approximately $2.2 billion of vegetable and animal oils and fats in 2021. Of that, about 30% was palm oil according to customs agency records. This figure, 56% of it, was mainly from Indonesia. The rest came from Malaysia.

Joo Hyeonjung was out with his friends picnicking along Seoul’s Hangang River.

Cosmetics can be considered a necessity for women, and any price rises there will hit me hard. It’s a fixed expense.