As the Strait of Hormuz reopened and closed again this week, manufacturers across China are navigating a roller coaster of concerns rooted in supply and pricing volatilities.
Soaring oil prices have already filtered through to processed fuel and petroleum-based raw materials that help power China’s manufacturing sector – the world’s largest – and a fragile two-week ceasefire between Iran and the United States is unlikely to restore pre-conflict stability in the near term, according to industry insiders.
“Some companies have begun delaying or cancelling orders,” said Wang Chao, a senior analyst at advisory firm Guangzhou Quantitative Consulting, adding that firms were attempting to avoid passing higher costs to consumers.
“This is not limited to factories. Cross-border e-commerce shipments have also been affected. In the home-appliance sector, higher freight costs have hit end-market demand, prompting overseas buyers to scale back or postpone purchases,” Wang added.
Brent crude oil trading around US$100 to US$105 a barrel remains “elevated enough to squeeze costs across supply chains”, Wang said. Crude was around US$70 per barrel before Israel and the US launched strikes on Iran more than a month ago. Prices were roughly US$96 a barrel as of Friday.
China’s factory-gate prices rose in March for the first time in more than three years – an early sign that the US-Israel war on Iran was starting to affect producers in the world’s second-largest economy.
