By Mary Yang with Tommy Wang in Hong Kong
Vacuum cleaners and steamers could become more expensive if the war in Iran drags on much longer, Chinese factory owners and traders warn, as the world’s manufacturing hub is gripped by “crazy” costs.
Weeks of US-Israeli attacks on Iran and the effective closure of the Strait of Hormuz have choked Asia’s oil supply, hampering the production of plastic – derived from oil – across the region.
Manufacturing giant China has been relatively protected from fuel shortages thanks to oil reserves and renewable energybut local factories are getting a bill of raw materials.
“Basically, we’ve lost money on all our orders,” said Bryant Chen, a manager at the RIMOO vacuum cleaner factory in Foshan, southern Guangdong province.
The price of plastic has risen roughly 50 percent since before the war in Iran, Chen told AFP as workers behind him connected suction pipes to metal tanks.
“The costs of the products we’re making are being greatly affected,” the 42-year-old said, listing the plastics, copper for the vacuum motor and raw materials in his power cables.
“Typically at this time we would be entering the peak season, but compared to the same period before, the shipment and production data are not very optimistic.”
Two hours away, plastic traders at the Zhangmutou warehousing center said the price swings were the worst they had seen in decades.
“It’s never been this crazy,” said Li Dong, 46, who entered the industry two decades ago.
The rice-sized pellets of plastic he bought for local phone boxes and EV battery factories were dumped wildly in March, sparking days of panic that blocked the small town’s streets as factories rushed to stock up.
“Mutual state of decline”
Exporters in Zhangmutou showed AFP a wide range of products that would become their pellets, including drones and badminton birds.
A trader sifted through pink, green and purple beads that she said would be molded into e-cigarette cases sold in the Middle East.
The Iran war has hit plastics production even harder than the disruption caused by the Covid pandemic, when ships could not come and go from China, Li said.
Some retailers cashed in on the plastic panic, he added, struggling to capitalize on rising costs.
Li said the price of plastics had fallen about 10 to 20 percent from its high, but he warned against holding oil further.
“Factories that we supply will suffer more because their direct costs will increase,” he said.
For exporters, the Middle East crisis has added to the hangover still lingering from Donald Trump’s sweeping global tariffs last year.
The US Supreme Court struck down these tariffs as illegal, but tariffs on Chinese goods entering the US are still around 20 percent.
On the outskirts of Guangzhou, a garment factory owner complained about the chaos caused by the US president’s trade war.
Overseas customers are afraid to order, while Chinese manufacturers cannot determine the costs of change.
“As a result, everyone is in a mutual state of decline,” said clothing boss Zhou, 55.
While 80 percent of his customers have returned, the fabric spread across his factory floor, made into sweatpants destined for Europe and North America, has risen 10 to 20 percent in cost because of the war in the Middle East.
As overseas orders fell, tailors were out of work for months.
“Tensions rise, orders disappear”
Migrant worker Jingjing returned to her hometown in Hubei province for two months, where she earned half the 400 yuan (US$60) she now earns in Guangzhou’s garment factories.
“When tensions rise… orders suddenly disappear,” the 42-year-old said.
But this year she said there is always something to do.
In a damp alley, Jingjing joined jobseekers haggling for higher wages, while outfit bosses perched on scooters wheeled employment signs, desperate for day laborers.
Chen, the vacuum factory manager, said he was “still concerned” about rising shipping costs if the war in Iran drags on.
“If shipping costs go up, that will cause the bottom line costs for our customers to go up significantly,” he said.
They “will have no way to sell normally, because the costs are simply too high.”
Chen said RIMOO plans to expand to other markets beyond the Middle East, where about 60 percent of its customers are based.
“We are still optimistic,” he said. “The market demand still exists.”
But analysts warn that the cost impact of the war will be felt for months.
“The problem is that all these costs will filter through supply chains for the rest of the year,” said supply chain consultant Cameron Johnson.
“The longer it goes on, that kind of cascades into much bigger problems, especially if there’s generally not enough oil to run things.”
