Christmas is still eight months away, but artificial tree manufacturer Lou Liping is already worried about a bad holiday season due to the war in Iran.
Lou’s company, Kitty Christmas Factory, has been manufacturing artificial trees for the American and European markets for nearly three decades. Its establishment is based in Yiwu city, known as the Christmas capital of China.
“Many customers… are delaying their orders,” she told CNBC last Friday in her showroom at the city’s International Expo Center. The center is home to hundreds of manufacturers who contribute to the country’s vast global production of artificial trees, garlands, ornaments and other decorations.
According to the American Christmas Tree Association, an estimated 87 percent of Christmas decorations sold in the United States come from China, with a large portion coming from Yiwu.
Lou said shipping disruptions in the Strait of Hormuz and high oil prices due to the Iranian conflict have increased his costs per tree by 10%. The base material of its trees is petroleum-derived PET plastic. The price of PET in its artificial pine needles has increased by 5%, and the cost of plastic used as packaging for shipments has increased by 15%, she said.
Lou said his revenue was down about 12% due to lost orders.
Factories in Yiwu normally prepare in spring to ensure their products are on store shelves for the Christmas shopping season.
“The war happened at a bad time, just when we need to move our shipments,” garland maker Yun Zhuomei told CNBC from her booth at the exhibition center. “It’s very painful for us, the manufacturers.”
Yun said plastic prices for its garlands have increased by as much as 40 percent.
Chen Lian, who makes Christmas lights, said she feared further price increases as suppliers all brought forward their delivery times to accommodate customers worried about transportation delays.
“Everyone needs to deliver between May and August so that demand is concentrated,” Chen said. “Material prices are bound to increase.”
To accommodate, artificial tree maker Lou said it has sped up shipments. And when its contracts with its customers allow it, it passes on part of the costs. For next year, she said she plans to design a wider variety of lower-end trees so more people can afford her products.
But for this season, Lou said U.S. buyers will likely be forced to pay at least 15 percent more.
“The price of Christmas trees in the United States will definitely increase,” she said. “It’s inevitable.”