Iran war jolts China’s well-oiled manufacturing hub

FOSHAN, China - Vacuum cleaners and jogging bottoms could get more expensive if the Iran war drags on for much longer, Chinese factory owners and traders warn, as the world’s manufacturing hub reels from “crazy” costs.

Weeks of US-Israeli strikes on Iran and the effective closure of the Strait of Hormuz have choked Asia’s oil supply, stymieing the production of plastic – derived from oil – across the region.

Manufacturing giant China has been comparatively sheltered from fuel shortages, thanks to oil reserves and renewable energy, but local factories are picking up a ballooning raw materials bill.

“Basically, we’ve been losing money on all our orders,” said Mr Bryant Chen, a manager at vacuum cleaner factory RIMOO in southern Guangdong province’s Foshan.

The price of plastic has risen roughly 50 per cent since before the Iran war, Mr Chen told AFP as workers behind him fastened suction tubes to metal tanks.

“The costs of the products that we are making are being very greatly affected,” the 42-year-old said, listing plastic, copper for the vacuum’s motor, and raw materials in its power cords.

“Typically, at this time, we’d be entering peak season, but compared with the same period previously, shipment and production data aren’t very optimistic.”

Two hours away, plastic traders in storage hub Zhangmutou said price fluctuations were the worst they have seen in decades.

“It has never been this crazy,” said Mr Li Dong, 46, who entered the industry two decades ago.

Prices of the plastic, rice-size pellets he buys for local phone case and EV battery factories jumped wildly in March, triggering days of panic that jammed the small town’s roads as factories rushed to stock up.

‘Mutual state of decline’

Exporters in Zhangmutou showed AFP a vast range of products their pellets would become, including drones and badminton shuttlecocks. One trader sifted through pink, green and purple beads that she said would be moulded into e-cigarette casings sold in the Middle East.

The Iran war has hit plastic production even harder than bottlenecks caused by the Covid-19 pandemic, when ships could not arrive and depart from China, Mr Li said.

Some sellers cashed in on the plastic panic, he added, fighting to take advantage of surging costs.

Mr Li said the price of plastic had dropped around 10 per cent to 20 per cent from its height, but he cautioned against further oil hold-ups.

“The factories we supply to will suffer the most because their direct costs will rise,” he said.

For exporters, the Middle East crisis has added to the hangover still lingering from US President Donald Trump’s sweeping global tariffs in 2025.

The US Supreme Court struck down those levies as illegal, but tolls on Chinese goods entering the US still sit at around 20 per cent.

On the outskirts of Guangzhou, one garment factory owner lamented the chaos triggered by the US President’s trade war.

Overseas clients are afraid to place orders, while Chinese manufacturers cannot pin down changing costs.

“As a result, everyone is in a mutual state of decline,” said a garment boss named Zhou, 55.

While 80 per cent of his clients have returned, the fabrics scattered on his factory floor that are made into jogging bottoms headed for Europe and North America have risen 10 per cent to 20 per cent in cost due to the Middle East war.

As overseas orders dropped, garment workers went for months without a job.

‘Tensions rise, orders disappear’

Migrant worker Jingjing returned to her home town in Hubei province for two months, where she made half the 400 yuan (S$75) she now earns in Guangzhou’s garment factories. “When tensions rise... orders suddenly disappear,” the 42-year-old said.

But she said that in 2026, she always has something to do.

In a damp back alley, Jingjing joined job seekers milling about leisurely, haggling for higher wages while garment bosses perched on scooters brandished hiring signs, desperate for day labourers.

Mr Chen, the vacuum factory manager, said he was “still worried” about surging shipping costs should the Iran war drag on.

“If shipping costs rise, it will cause the final costs for our customers to increase sharply,” he said.

They “will have no way to sell normally, because the costs are just too high”.

Mr Chen said RIMOO plans to expand to other markets beyond the Middle East, where around 60 per cent of its customers are based.

“We are still optimistic,” he said. “The market demand still exists.”

But analysts warn that the war’s impact on costs will be felt for months.

Shanghai-based supply chain consultant Cameron Johnson said: “The problem is all of these costs will filter through the supply chains for the rest of the year.

“The longer it goes on, that kind of cascades into much bigger problems, particularly if there’s not enough oil in general to run stuff.” AFP