Christmas is still eight months away, but artificial tree maker Lu Liping is already worried that the Iran war will lead to a downturn in the holiday season.
Lu’s company, Kitty Christmas Factory, has been making artificial trees for the U.S. and European markets for nearly 30 years. Her facility is based in Yiwu, known as the Christmas capital of China.
“Many customers…have held back on their orders,” she told CNBC last Friday at her showroom at the city’s International Expo Center. The center houses hundreds of manufacturers that contribute to the country’s vast production of artificial trees, tinsel, ornaments and other decorative items around the world.
According to the American Christmas Tree Association, an estimated 87% of Christmas decorations sold in the United States come from China, with many coming from Yiwu.
Lu said the cost per tree had increased by 10% due to transportation disruptions in the Strait of Hormuz and soaring oil prices due to the Iran conflict. The base material of her tree is petroleum-based PET plastic. The price of the PET in her synthetic pine needles has increased by 5%, and the cost of the plastic used in shipping packaging has increased by 15%, she said.
Lu said her revenue is down about 12% due to lost orders.
Yiwu factories typically prepare in the spring to get products on shelves for the Christmas shopping season.
“The war happened at the worst possible time. It happened right when we needed to ship,” tinsel maker Yun Juomei told CNBC from his booth at the Expo Center. “This is very painful for us manufacturers.”
Yun said the price of tinsel plastic has increased by 40%.
Cheng Lian, who makes Christmas lights, said she was worried about further price increases as suppliers moved up delivery schedules to accommodate customers concerned about shipping delays.
“Everyone needs to deliver between May and August, so there is a concentration of demand,” Chen said. “Material prices will definitely go up.”
To adjust, artificial tree maker Lu said it has accelerated shipments. And we pass on some of the costs to the extent that our customer contracts allow. Looking ahead to next year, she said she aims to design a more diverse range of trees at lower prices so more people can buy her products.
But Lu said U.S. shoppers will likely end up paying at least 15% more for this season.
“The price of Christmas trees in the U.S. will definitely go up,” she says. It’s inevitable.
