Hormuz disruptions hit China’s Christmas capital and holiday spending
Christmas is still eight months away, but artificial tree maker Lou Liping is already worried about a bad holiday season due to the Iran war.
Lou’s company, Kitty Christmas Factory, has been producing artificial trees for the US and European markets for nearly three decades. Its facility is located in Yiwu city, known as the Christmas capital of China.
“A lot of customers … are delaying orders,” he told CNBC at his showroom at the city’s international expo center last Friday. The center is home to hundreds of manufacturers who contribute to the country’s vast production of artificial trees, tinsel, ornaments and other decorations around the world.
According to the American Christmas Tree Association, an estimated 87% of Christmas decor sold in the U.S. comes from China, most of it from Yiwu.
Shipping disruptions in the Strait of Hormuz and high oil prices due to the conflict in Iran have increased their cost per tree by 10%, Lou said. The basic material of their trees is PET plastic obtained from petroleum. He said that the price of PET in artificial pine needles increased by 5 percent and the cost of plastic used as packaging in shipments increased by 15 percent.
Lou said his revenue dropped about 12% due to lost orders.
Yiwu’s factories normally gear up during the spring to ensure their products are on store shelves for the Christmas shopping season.
“The war happened at a bad time, just when we needed to get our shipments in,” tinsel maker Yun Zhuomei told CNBC at his booth at the expo center. he said. “It’s very painful for us producers.”
Yun said tinsel plastic prices have increased by up to 40%.
Chen Lian, who makes Christmas lights, said he feared price increases would continue as suppliers all accelerated delivery schedules to accommodate customers worried about shipping delays.
“Everyone needs to deliver between May and August for demand to peak,” Chen said. “It is inevitable that material prices will increase.”
Artificial tree manufacturer Lou said it is speeding up shipments to accommodate this. It assumes some of the costs when its contracts with customers allow it. Next year, he said he aims to design a wider variety of lower-end trees so more people can afford his products.
But this season, Lou said American consumers will likely have to pay at least 15% more.
“The price of Christmas trees in the U.S. will definitely increase,” he said. “This is inevitable.”
