Christmas is still eight months away, but artificial tree maker Lou Liping is already worried about a bad Christmas season due to the Iran war.
Lou's company, Kitty Christmas Factory, has been manufacturing artificial trees for almost three decades for the American and European markets. Its facilities are based in the city of Yiwu, known as the Christmas capital of China.
“Many customers… are holding off on orders,” he told CNBC last Friday at his showroom in the city's international exhibition center. The center is home to hundreds of manufacturers who contribute to the country's vast production of artificial trees, tinsel, ornaments and other world decorations.
An estimated 87% of Christmas decorations sold in the U.S. come from China, according to the American Christmas Tree Association, and much of it comes from Yiwu.
Lou said the disruption of shipping in the Strait of Hormuz and high oil prices due to the conflict with Iran have raised his costs per tree by 10%. The base material of its trees is PET plastic derived from petroleum. The price of PET in its artificial pine needles increased by 5% and the cost of plastic used as packaging for shipments increased by 15%, he said.
Lou said his revenue is down about 12% due to lost orders.
Yiwu factories typically prepare in the spring to ensure their products are on store shelves for the holiday shopping season.
“The war happened at a bad time, just when we needed to get our shipments out,” tinsel maker Yun Zhuomei told CNBC from his booth at the exhibition center. “It's very painful for us manufacturers.”
Yun said plastic prices for his tinsel have increased by up to 40%.
Chen Lian, who makes Christmas lights, said he fears further price increases as all suppliers move up delivery schedules to accommodate customers worried about transportation delays.
“Everyone needs to deliver between May and August so that demand is concentrated,” Chen said. “Material prices will surely go up.”
To adapt, artificial tree maker Lou said it has accelerated shipments. And when its contracts with customers allow it, it passes along some costs. For next year, he said his goal is to design a wider variety of lower-end trees so more people can afford his products.
But for this season, Lou said American buyers will probably be forced to pay at least 15% more.
“The price of Christmas trees in the United States will definitely increase,” he said. “It's inevitable.”
