Many Chinese exporters have had to raise the prices of their exports as raw material prices have been rising recently, while a blockage in the Suez Canal has put more pressure on global supply routes and increased transportation costs.
The Wall Street Journal reported on March 30 that the price of chemicals and metals used by outdoor furniture maker Resysta AV to produce cushions, foam and frames has risen rapidly in recent months.
Resysta AV has factories in China and Indonesia. Rene de Jong, its director in Foshan, Guangdong, China, said, “I’ve lived in China for almost 25 years and I’ve never seen anything like this, never seen steel and aluminum prices soar all the way up and shipping costs as high as they are now.”
De Jong said the company’s margins are under pressure and is preparing to raise prices on new orders by about 7 percent this summer.
A Chinese toy wholesaler, for its part, has raised prices across the board for new orders by 10-15 percent since early March.
The report said Chinese factories are having an increasingly difficult Time controlling costs at a time when prices for commodities such as wood, steel and cotton are all rising, especially after last year’s Communist Party virus outbreak and anti-Epidemic embargo hurt profits.
In the past, the availability of cheap labor in Chinese factories was a common reason behind the depressed prices of jeans, sofas and many other goods on international markets, but that has changed as factories’ own costs have climbed.
In recent months, shipping costs have soared due to port bottlenecks and container shortages. In some cases, customers are asking Chinese suppliers to share this cost. In other cases, Chinese factories are having to pay more to ship imported raw materials, such as lumber.
At the same time, many commodity prices remain high or continue to climb, and some companies are choosing to pass those costs on to their customers.
According to the U.S. Bureau of Labor Statistics, the price of Chinese exports to the U.S. rose a cumulative 1.2 percent over the past year, the biggest increase since 2012, with most of that occurring in the three months ending in February.
Ni Fang, manager of Ji’an Huaerxin Shoes Co. in Jiangxi province, said the company began receiving price increases from suppliers after the Chinese Yellow New Year holiday in February, raising prices by 10-30 percent for raw materials needed to produce work boots and packaging, including polyurethane, steel and paper. Huaxin Shoes is a manufacturer of work boots, and its products are mainly sold to Europe and Southeast Asia.
Due to the price increase of raw materials, HuarXin Shoes raised the prices of most of its products by about 5 percent in late February.
Ni Fang said this round of raw material cost spikes pushed the company to a point where it could barely afford it, but the company still bore part of the cost increase because it feared the price hike would lead to the loss of too many customers.
Some factory owners and economists, meanwhile, suspect that some buyers are hoarding goods, adding to the price pressure.
Chen Yang, a trader for a state-owned textile company in Jiangsu province, said some upstream suppliers began stockpiling cotton before the Yellow New Year. cotton prices jumped to about $2,600 a ton in early March, compared with about $1,990 a ton in mid-February.
Since raw materials account for about 70-80 percent of total costs, his textile company had to raise product prices accordingly.
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