China suppliers warn of higher U.S. prices due to Hormuz closure
Pickleball racket maker Devi Wei has a message for US consumers.
“Americans will have to pay more,” a Chinese businessman told CNBC at the Beijing trade fair held at the China International Expo Center last week.
Wei, who founded his own export company Huijin Trade, said he had to increase the prices of paddles and pickleballs by up to 20% due to recent fluctuations in oil prices due to the Iran war and the closure of the Strait of Hormuz.
Wei’s products are made from polypropylene, a plastic material derived from oil and produced in the Middle East, which is a dominant producer in the global industry. The war in Iran has halted shipments of oil and its products through the Strait of Hormuz, raising concerns among Chinese producers at the trade fair about further disruption to the global supply chain.
“I may have to go even higher,” Wei said. “Maybe twice as much if the Iran war doesn’t stop soon.”
Rising oil prices are also reflected in the prices of all kinds of commodity-based products for manufacturing.
James Li, who produces scarves and says that he sells one-third of his stocks to the USA, increased the price of his polyester products by 5 percent.
“This scarf is made up of 30% polyester,” Li told CNBC at the trade show booth. “We will definitely pass the extra cost on to our customers.”
Wang Mingming, general manager of toy maker Jinming Gifts, said he had a two-month supply of plastic polymer PVC but was not sure he could continue to charge more for his figurines.
“These materials are almost irreplaceable in our industry,” Wang said. “We really can’t get by if oil prices go up any further.”
Cameron Johnson, senior partner at Shanghai-based supply chain consultancy Tidalwave Solutions, said he foresees competition for oil-related products across all sectors if the crisis in the Strait of Hormuz is not resolved soon. A prolonged stalemate in the critical waterway also increases the likelihood of crop shortages.
Predicting that more priority will be given to automobiles and the medical field, Johnson said, “If this situation continues until May, everyone will be in big trouble and there will be prioritization between sectors.” “It is unclear when new supply will arrive.”
Perhaps the biggest concern among Chinese producers is what more expensive oil will mean for discretionary spending by consumers around the world.
More money for gas means less money for Wei’s pickles.
“Ordinary people are most affected by high oil prices,” he said. “Their spending power is not what it used to be.”
