Tension in the Middle East is making China suppliers wary about accepting orders from the area. While exports have not been affected significantly, cautious makers are insuring goods against cancellations and delays.
At the height of the financial downturn, many suppliers in China turned to emerging markets, including the Middle East, to help boost sales. The same companies are now concerned the tumultuous political situation in the area may have a negative impact on their export business. Many of them are now buying credit insurance against possible losses.
|Ruiher's exports of LED lighting products to the Middle East have not slowed in recent months.|
The China Ceramics Industry Association noted 30 percent of orders to makers in Foshan, Guangdong province, from buyers in the Middle East were cancelled early this year. This included goods that were already loaded for shipping. The Middle East accounts for more than 15 percent of Foshan's ceramics exports.
In March, Fuzhou Fedtex Garment Co. Ltd received a request from one of its buyers to change the destination port in Yemen to avoid any potential conflicts there. To protect against cancellations, and shipping delays, the company insured products that were bound for the Middle East. The cost for insuring the goods is between $0.05 and $0.07 per piece, and is added on to export prices.
Sinosure is said to be the only company in China that insures products to be shipped to countries with political or economic turmoil. Suppliers could recover as much as 90 percent of their goods' declared value if these are insured. Sinosure claims to have disbursed more than 200 million yuan ($30 million) as compensation to some companies that have construction projects in Libya.
For many companies the tumultuous situation in the Middle East is affecting their nerves more than their business.
The Middle East is a large market for low-end mobile phones from China. But Libya is not a major importer of such devices, and the political tension there has not had an impact on China's exports of the product. Even so, suppliers are concerned their overseas sales will take a hit if the conflict is not resolved soon and spreads to neighboring countries such as Jordan.
LED lighting products maker Ruiher Lighting Technology said it has not experienced any loss in export sales yet. But one of the company's customers from Jordan said business at local retailers was slow, and some had to close shop because of the volatile situation. Sales to the Middle East account for about 20 percent of Ruiher's total exports.
Lan Weibing of the China Ceramics Industry Association said many of its members are worried about the political unrest in the Middle East. Quite a few have expressed reluctance to accept orders from the area. Some of those that continue to take orders from the Middle East incorporate additional conditions in their contracts, including delays in delivery in case the situation worsens.
But Lan also said buyers do not usually shoulder such losses and suggested makers should instead develop versatile products that can meet the needs of various markets. Some analysts, however, said this is not easy for small makers to do, especially those concentrating on low-end models.
In the ceramic tiles industry, for instance, European suppliers dominate the high-end line and it is difficult for China companies to penetrate that segment. The EU and the US, meanwhile, charge anti-dumping duties on imports of China-made tiles.
Note: This article "Middle East unrest worries makers, despite minimal impact" was originally published by Global Sources, a leading business-to-business media company and a primary facilitator of trade with China manufacturers and India suppliers, providing essential sourcing information to volume buyers through our e-magazines, trade shows and industry research.
All price quotes in this report are in US dollars unless otherwise specified. FOB prices were provided by the companies interviewed only as reference prices at the time of interview and may have changed.
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