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High material and components costs push up China export prices

More than 70% of suppliers increased export prices in 2010, according to a recent study, more price hikes are expected.

Experts predict that export prices of various China products are likely to increase in the months ahead, as the cost of major materials and components continues to rise.

A new poll of 232 exporters by Global Sources shows that three-quarters of respondents said they boosted export prices in 2010, due mainly to higher material and component expenses. One-third of suppliers said costs increased by 6 to 10% last year, while 41% reported that materials purchases were 11 to more than 20% more expensive.

Half of respondents said they capped export price adjustments to 5%, while one-third posted increases of six to 10%.

"In past surveys, suppliers indicated they would make operational adjustments to boost profit margins. This is no longer an option with material and labour costs up across nearly every industry. As a result, we are seeing a larger number of suppliers raising prices and transitioning to produce higher-end products," Craig Pepples, Global Sources' president of corporate affairs.

"This is a natural evolution for China's economy, as more makers shift from low-cost supplier to high-quality manufacturer for global brands as well as their own. The need for China exporters to work harder to market themselves and justify their higher prices in terms of service, product quality or production volume is more apparent than ever."

The report noted that, as material and component costs continuing to rise, almost one-third of suppliers said they plan to improve the manufacturing efficiency at their factories, while 24% plan to implement another round of price adjustments.

Some 61% of survey respondents said 10% or less of their key materials and components are made overseas. Only 12% reported using mostly imported parts.

"Manufacturers of consumer goods employ more locally made materials in their products. 68% of surveyed suppliers from the consumer goods sector said no more than 10% of their requirement is imported," the study stated.

"Further, 88% of survey respondents said they purchase from local agents and distributors of international materials and components suppliers. Only 12% import directly from these overseas providers."