With eight months to go until Christmas, many small commodity exporters in Yiwu, China are already worrying that the Iran conflict will impact this year’s Christmas season export sales.
Boss Lou Liping of Kitty Christmas Factory in Yiwu, which has been producing artificial Christmas trees for the European and American markets for nearly thirty years, told CNBC that many customers this year have postponed placing orders.
Yiwu is home to hundreds of manufacturers producing artificial Christmas trees, ribbons, decorations, and other Christmas ornaments for the European and American markets. The American Christmas Tree Association (ACTA) estimates that about 87% of Christmas decorations sold in the U.S. come from China, with a large portion produced in Yiwu.
Lou Liping revealed that the Iran conflict has led to disruptions in shipping through the Hormuz Strait, resulting in higher oil prices, which has increased the cost of production by 10% per tree in her factory. The primary material used in the production of the Christmas trees is PET plastic derived from oil. She mentioned that the price of PET used in artificial needles has risen by 5%, and the cost of transport packaging plastics has increased by 15%.
Furthermore, due to order losses, the factory’s revenue has declined by approximately 12%.
Yiwu factories typically ramp up production in the spring to ensure products are on shelves before the Christmas shopping season. Another Christmas ribbon manufacturer revealed that the outbreak of the Iran conflict coincided with the shipping period for the factory, which was a bolt from the blue for the manufacturer. Additionally, the plastic prices for the ribbons have surged by as much as 40%.
Christmas lights manufacturer Chen Lian is concerned that raw material prices will further rise, as suppliers are making early deliveries to ensure transportation is not delayed and to reassure customers.
Lou Liping disclosed that she has accelerated the shipping speed. Moreover, if the contracts allow, she will pass on some of the costs to customers.