Pickleball paddleball producer Devi Wei has a message for American buyers.
“Americans will have to pay more,” the Chinese businessman told CNBC at a Beijing trade show last week at the China International Exhibition Center.
Due to recent fluctuations in oil prices resulting from the war in Iran and the closure of the Strait of Hormuz, Wei, who founded his own export company, Huijin Trade, had to increase the prices of his rackets and pickleballs by up to 20 percent, he said.
Wei’s products are made of polypropylene, a plastic material derived from petroleum and manufactured in the Middle East, a dominant producer in the global industry. The war in Iran has blocked shipments of oil and its products through the Strait of Hormuz, raising concerns among Chinese manufacturers at the show about further disruptions in the global supply chain.
“Maybe I should go even higher,” Wei said. “Maybe double that if the war in Iran doesn’t end soon.”
The surge in oil prices is reflected in the prices of all kinds of products whose manufacturing depends on this commodity.
James Li, which makes scarves and says it sells a third of its inventory in the United States, marked up its polyester products by 5%.
“This scarf is made of 30 percent polyester,” Li told CNBC from his booth at the trade show. “We will certainly pass the additional cost on to our customers.”
Wang Mingming, general manager of toymaker Jinming Gifts, said he stocked two months’ worth of PVC polymer plastic but was not sure he could resist charging more for his figurines.
“In our industry, these materials are almost irreplaceable,” Wang said. “If oil prices continue to rise, we really won’t make it.”
Cameron Johnson, senior partner at Shanghai-based supply chain consultancy Tidalwave Solutions, said he foresees competition for oil-related products between entire sectors if the Strait of Hormuz crisis is not resolved quickly. A prolonged standoff in this critical waterway also raises the possibility of product shortages.
“If this continues until May, everyone will be in big trouble and there will be sorting between industries,” Mr. Johnson said, predicting that automotive and medical fields would receive higher priority. “There is no visibility as to when new supplies will arrive.”
Perhaps the biggest worry for Chinese manufacturers is the impact of more expensive oil on the discretionary spending of consumers around the world.
More money for gas means less for Wei’s pickleballs.
“It is ordinary people who are most affected by the high price of oil,” he said. “Their purchasing power is no longer what it used to be.”