China’s consumer goods factories cut output as Iran war sends costs soaring

The disruption to shipping traffic along the Strait of Hormuz is starting to bite in China, where some manufacturers are reducing production due to soaring energy, raw material and freight costs.Zhao, who runs a bicycle factory in Guangzhou serving clients in the United States, Middle East and Europe, has already put most export business on hold.“We also cancelled all orders from Iran,” he said. “The cost of aluminium, a key raw material for bicycle production, has risen by 30 per cent.”Logistics costs have also climbed by about 15 per cent, and deliveries are increasingly being delayed, according to Zhao. “With costs rising across the board, I’ve had little choice but to suspend factory operations for now and wait things out,” he said.He is not alone. Zhang, a Chinese national who runs a facility in Vietnam supplying parts and accessories to appliance and car manufacturers, said his business had already had to extend delivery times due to rising logistics and raw material costs.“The pressure from rising costs has become very clear this year,” he said. “Prices for iron ore, scrap steel, coking coal, copper and plastics have all continued to rise, directly pushing up our production costs.”