Pickleball paddle maker Devi Wei has a message for American buyers.
“Americans will have to pay more,” a Chinese businessman told CNBC at the Beijing trade show at the China International Exhibition Center last week.
Due to recent fluctuations in oil prices due to the Iran war and the closure of the Strait of Hormuz, Wei, who set up his own export business, Huijin Trade, has had to raise the prices of his paddles and pickleballs by 20%, he said.
Wei’s luggage is made of polypropylene, a plastic material derived from oil and made in the Middle East, a major 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 manufacturers at the trade fair about further disruption to global supply chains.
“I may have to go even higher,” Wei said. “Maybe double if Iran war doesn’t stop soon.”
The rising prices of oil are impacting the prices of all types of products that depend on this commodity for manufacturing.
James Lee, who makes scarves and says he sells a third of his inventory to the US, has raised the price of his polyester products by 5%.
“This scarf is 30% polyester,” Lee told CNBC from her trade show booth. “We will certainly pass the additional costs on to our customers.”
Wang Mingming, general manager of toy maker Jinming Gifts, said he has been hoarding two months’ worth of plastic polymer PVC, but he is not sure he can avoid charging more for his figurines.
“In our industry, these materials are almost irreplaceable,” Wang said. “If oil prices go up further, we really won’t be able to manage.”
Cameron Johnson, senior partner at Shanghai-based supply chain consultancy TidalWave Solutions, said he expected competition for oil-related products between entire regions if the crisis in the Strait of Hormuz is not resolved soon. Prolonged blockage of vital waterways also increases the possibility of product shortages.
“If this continues into May, everyone will be in big trouble and the industry will be in disarray,” Johnson said. He predicted that auto and medical sectors would be given higher priority. “There is no clarity as to when the new supplies will arrive.”
Perhaps the biggest concern among China’s manufacturers is what effect higher oil prices will have on discretionary spending by consumers around the world.
More money for gas means less money for Wei’s pickleball.
“The common people are being affected the most by the high price of oil,” he said. “Their spending power is not what it used to be.”
