Middle East situation remains volatile, home appliance exports face "growing pains"

As of March 20, the U.S. and its allies’ war on Iran has entered its 21st day. China’s home appliance exports are experiencing “pain,” with one aspect being that exports to the Middle East are being hindered and logistics costs have doubled, and another being that raw material costs have risen sharply. In the first and second quarters of this year, the scheduled output for air conditioner exports to the Middle East has already been reduced.

Some industry insiders believe that because only a few countries are involved in this war, and the main impacts are on logistics and raw material costs, the long-term effect on home appliance exports is expected to be limited.

Logistics costs have surged, hindering air conditioner exports to the Middle East

The Middle East is located in a desert region with generally hot weather, and in recent years it has been one of China’s key growth markets for air conditioner exports. A manager at an air conditioner company told First Finance that their export operations to the Middle East have basically been halted, because freight and logistics costs from China to the Middle East have increased 3–4 times, and they expect a return to normal only after the ceasefire.

“The short-term impact of this war on exports of air conditioners to the Middle East is significant—sometimes shipments can’t be made at all. If the goods are already en route, it becomes even more complicated,” said another industry executive.

A recent report by industry research firm Industry Online shows that since the conflict in the Middle East intensified, China’s planned export volume of household air conditioners has been significantly lowered compared to earlier plans. Overseas clients have canceled or delayed orders due to higher shipping costs or war-related surcharges from shipping companies. In March alone, the reduction is expected to exceed 500,000 units.

By 2025, China’s household air conditioner exports to the Middle East exceeded 17 million units, accounting for 20.8% of total exports. Among these, exports to the core war-affected regions totaled 8.36 million units, representing 10.2% of total exports and nearly half of the total exports to the Middle East.

The Red Sea and the Strait of Hormuz are the main routes for Chinese home appliances to reach the Middle East. After the conflict broke out, ships were forced to reroute around the Cape of Good Hope, increasing voyage time by 7–10 days. The shipping cycle extended from the original 35–40 days to 50–55 days. Logistics costs have risen sharply: the freight for a standard container on the Persian Gulf route has reached $1,327, up 35.41% month-over-month. The war risk premium rate increased from 0.35% to 0.85%, a rise of 143%. War-related surcharges per container now range from $2,000 to $4,000.

Additionally, some ports have suspended operations or limited services, causing delays in sailing schedules and cargo backlogs, increasing the risk of order defaults and warehousing costs, which further pressure companies’ cash flow.

Customs data show that China exported home appliances to 17 Middle Eastern countries in 2025, with a total value of $12.577 billion, up 5.1% year-over-year; export volume reached 730 million units, an increase of 8.2%. Industry experts told First Finance that not only air conditioners but other home appliances exported to the Middle East are also likely to be affected to some extent by this conflict.

Raw material prices have surged, increasing export costs

Even companies not directly targeting the Middle Eastern market are affected, as raw material costs have risen sharply.

Li Mingyang, general manager of Zhongshan Letu Electric Appliance, told First Finance that their overall costs have increased by approximately 20–24%, mainly due to sharp rises in raw materials like plastics—some by 30%, some by 40%, and even up to 50%—which has impacted their ability to accept new export orders for small home appliances.

After the conflict in the Middle East, in March 2026, the costs of ABS and PP plastics increased by 40–50% and 30% month-over-month, respectively; copper costs rose 25–30%; steel and iron costs increased 15–20%.

“Currently, overseas clients generally do not accept such cost increases. There needs to be a process of digestion. I expect raw material prices will continue to rise, and then the market (and overseas clients) will have no choice but to accept it,” Li Mingyang said.

He revealed that his factory in Zhongshan, which exports electric fans, is still producing orders placed before the war, using raw materials purchased prior to the conflict. “The orders I have now will be completed by April, but I dare not accept new orders. If I do, I expect to incur losses because the new prices would need to be at least 20% higher to maintain the original profit margin, and overseas clients are not accepting price increases now.”

Another home appliance exporter in East China told the reporter that since the outbreak of the Middle East conflict, raw material prices have fluctuated significantly, making it very difficult to raise prices for their finished products.

The impact of raw material price increases on air conditioner exports is also significant. Industry Online’s research indicates that core raw materials like copper, aluminum, and plastics account for over 60% of production costs. The Middle East conflict has caused energy prices to fluctuate and disrupted supply chains, leading to sharp increases in raw material prices. As of February 2026, spot copper prices reached RMB 102,000 per ton, up 32.51% year-over-year; aluminum and plastics, driven by oil prices, increased by 10–25%, and refrigerant prices surged over 180%. Multiple factors contribute to this round of raw material price hikes, with the Middle East war being a key driver.

Industry profit margins are under pressure

The Middle East is one of the regions with higher export unit prices, so reductions in exports there will impact overall average export prices. Although some companies have attempted to raise export prices, they cannot fully offset the increased costs. Industry Online predicts that this year, the export gross profit margin for the air conditioning industry may decline by 3–5 percentage points. Some small and medium-sized enterprises may face a dilemma of “difficult to raise prices while costs are soaring.”

A senior industry professional believes that the Middle East still needs Chinese products, as Gulf countries like Saudi Arabia and the UAE remain relatively stable, and consumer purchasing power persists. He recommends that export companies avoid “price wars” and instead raise prices when necessary amid rising raw material costs.

Zhang Qingqing, an analyst at Industry Online, expects that in the next 1–2 quarters, the pain period for air conditioner exports to the Middle East will continue. According to monitoring data from Industry Online, in March 2026, China’s scheduled export production of household air conditioners was 10.14 million units, down 12.4% compared to the same period last year. Production plans for March and the following two months have been lowered to varying degrees.

“Long-term, the conflict will accelerate Chinese companies’ shift from product exports toward localization and domestic operation,” Zhang Qingqing said. For example, Haier has established a factory in Egypt, serving the North Africa and Middle East markets, reducing risks through local production.

(This article is from First Finance.)