By Wall Street Journal
This article was published in Wall Street Journal March 29, 2021.
HONG KONG—Rising raw-materials costs and unrelenting supply-chain constraints are prompting many Chinese exporters to increase prices for the goods they sell abroad, raising fears it may add to global inflationary pressures.
The fears have deepened in recent days, after a grounded container ship blocked the Suez Canal, further straining global supply lines stretched by the coronavirus pandemic and stronger-than-expected demand for computer chips and other goods.
Rene de Jong, director of Resysta AV, an outdoor furniture manufacturer based in the southern Chinese city of Foshan, said he plans to raise prices by around 7% on new orders this summer.
That’s largely because prices of chemicals and metals that are used to produce cushions, foams and frames in the company’s factories in China and Indonesia have climbed rapidly in recent months. Shipping freight rates have also climbed roughly 90% since last June, though they are often paid by clients.
“In my nearly 25 years in China, I’ve never seen anything like this. I’ve never seen shipping costs like this before while steel and aluminum prices shot through the roof,” he said, adding that the company’s profit margins are under pressure.
Other Chinese exporters raising prices include apparel businesses and a toy wholesaler who told The Wall Street Journal his company has raised prices for new orders across the board by 10% to 15% since the beginning of March.
Price increases from Chinese factories alone aren’t necessarily enough to push inflation higher in the U.S. and elsewhere. Much of the sting could be absorbed if Western retailers choose to eat the cost increases themselves without passing them on to consumers, though doing so would squeeze retailers’ profit margins.