Mid-East war continues to pressure manufacturers' production costs

Hong Kong manufacturers warned that rising production costs stemming from the ongoing Middle East war could harm the global economy if persist, despite the city's better-than-expected export performance in March.

Chinese Manufacturers' Association of Hong Kong president Wingco Lo Kam-wing said Hong Kong manufacturers have suffered from several rising costs due to the war, including a 10 to 30 percent increase in short-term logistics costs and a 50 to 100 percent rise in long-haul costs, such as in the Middle East and Europe. 

Hong Kong's exports in March this year surged by 35.8 percent, the highest growth since January 2021, with the value of total exports reaching HK$618.4 billion, the Census and Statistics Department data showed.

Lo also noted higher insurance and fuel surcharges, adding that diesel prices nearly doubled, and that some Southeast Asian regions experienced energy shortages or even power outages, forcing companies to rely on costly diesel generators.

He said that material prices, such as oil, petrochemicals, metals, and packaging materials, rose by 10 to 30 percent. 

The war also poses supply chain instability. Lo mentioned that unstable flights and sailings, coupled with tighter cargo space, have delayed shipments, extending delivery times by two to three weeks and leading to higher inventory and slower capital turnover.

However, Lo said rising costs are difficult to pass on to downstream customers or consumers.

Lo said he hopes the Hong Kong Export Credit Insurance Corporation can strengthen support for export credit risks, accounts receivable, and default protection.

He suggested that enterprises switch to green energy and emphasized the need for government support, adding that they can reduce their reliance on fossil fuels by using alternatives such as petroleum by-products.

Meanwhile, Lo said the war hasn't affected the association's planned overseas visit to the Western regions of China and to Belt and Road countries, which are the focus of this year's overseas visits.

In response to the 15th Five-Year Plan, the association launches the Enterprises Going Global Planner for mainland enterprises expanding globally. It targets small and medium enterprises, traditional manufacturers upgrading via technology platforms, and companies shifting from original equipment manufacturer to brand and sales channels.

The service seeks to reduce time and costs for enterprises going global, connect Hong Kong and mainland companies to foster economic cooperation, and create a mutually beneficial ecosystem for global expansion.
 

 

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