(Yicai) March 18 -- Chinese exporters are already being affected the Middle East conflict, with factories halting production, orders being halted, and trade fairs getting cancelled.

“We've stopped shipments, and put all new orders on hold,” Che Yunwen, who supplies pet products, told Yicai. Even though his company has only a handful of clients in the Middle East, wild swings in crude oil and downstream product prices since the conflict began have forced it to pause production and stop taking new orders.

The company’s remaining raw material stocks can only be used to fulfil orders from long-standing customers placed before last month’s Chinese New Year holiday, and new business is effectively off the table, Chen pointed out.

“Even though new buyers ask for quotes, our upstream suppliers either cannot offer prices or the quotes given in the morning expire by noon,” he said, adding that the prices of nearly every raw input are either surging or swinging sharply.

Raw material prices have jumped by about 40 percent since early this month, completely eroding the company's profit margin, Che noted. If costs do not fall or stabilize by March 31, the firm will have to negotiate price increases with customers, he added.

Ding Yandong, a Zhejiang-based exporter, said he has reconnected with Middle Eastern clients after the conflict began, and there is tacit agreement among them that there will be no new orders. The risks go beyond disrupted logistics, he said.

“Raw material prices have risen far too sharply,” he told Yicai, adding that the impact extends well beyond Middle Eastern buyers.

"Transportation to the Middle East has been disrupted, chemical fiber prices are highly volatile, and we can’t provide valid quotes for large or long-term orders," said Wu Changming, who runs a textile fabric company in Jiangsu province. Buyers and producers are both waiting for raw input prices to settle, he added.

Thanks to a surge in its Middle Eastern clientele, Wu’s company had strong growth last year and shipments held steady in the first two months of this year. Still, Wu concedes that worsening conditions in the region are likely to dent this year’s revenue targets. “Matching last year’s result would be good enough,” he said.

Chinese manufacturers are moving to tap alternative markets to clear inventory and cushion losses after a drop-off in Middle East orders.

Wu said his company has redirected some shipments to test markets in Southeast Asia, such as Thailand. “We’ll see how it goes,” he said. “If the war lasts less than two months, raw material prices should return to normal, but if the conflict drags on, we will need to re-evaluate the market outlook.”

Many Chinese trade exhibitions planned for the Middle East have also been cancelled or postponed, as security concerns combine with fewer flights and sharply higher airfares.

"All Middle East exhibitions scheduled from this month to May have been called off or delayed," Xu Yiran, a business manager at Ningbo MiAo Business Exhibition, said to Yicai. A fair planned for Dubai in June has not been canceled or postponed yet, though about 400 companies had registered before the conflict began, Xu noted.

"Some companies have decided to put the Middle East market on hold," with Ningbo MiAo receiving many requests from exhibitors to cancel or switch events, Xu said. "Many who signed up for shows in the region have decided to join our exhibitions in Vietnam or Poland instead.”

Editors: Tang Shihua, Martin Kadiev