Pickleball paddle producer Debi Wei has a message for US shoppers.
“Americans will have to pay more money,” a Chinese businessman told CNBC at a 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 founded his own export business, Huijin Trade, has had to raise the prices of paddles and pickleballs by up to 20%, he said.
Wei’s products are made from polypropylene, a petroleum-based plastic material, and manufactured in the Middle East, a major producer in the world’s industry. The Iran war has disrupted the shipment of oil and oil products through the Strait of Hormuz, raising concerns among Chinese manufacturers attending the trade show about further disruption to global supply chains.
“I might have to go higher,” Way said. “If the Iran war doesn’t stop soon, it will probably double.”
Rising oil prices are impacting the prices of all types of products that rely on primary commodities for production.
James Lee, which makes scarves and sells a third of its inventory to the United States, has raised the price of its polyester products by 5%.
“This scarf is 30% polyester,” Lee told CNBC from the trade show booth. “We will certainly pass on any additional costs to our customers.”
Wang Minming, general manager of toy maker Jinming Gifts, said he has stocked up on two months’ worth of plastic polymer PVC, but is unsure if he can hold off on paying extra for the figures.
“In our industry, these materials are almost irreplaceable,” Wang said. “If oil prices rise any higher, we really won’t be able to survive.”
Cameron Johnson, senior partner at Tidal Wave Solutions, a Shanghai-based supply chain consulting firm, said he expected competition for oil-related products across the industry if the Strait of Hormuz crisis is not resolved soon. The longer a critical waterway is blocked, the more likely product shortages will occur.
“If this continues into May, there will be huge challenges for everyone and there will be triage between industries,” Johnson said, predicting that the automotive and medical sectors would be given higher priority. “We cannot predict when new supplies will arrive.”
Perhaps the biggest concern for Chinese manufacturers is how rising oil prices will affect discretionary spending among consumers around the world.
As gas costs increase, Wei’s pickleball costs decrease.
“The people most under pressure from high oil prices are ordinary people,” he said. “Their purchasing power is not what it used to be.”
