Industrial costs up 50% in Hong Kong since start of Middle East war: oil executive
Operating costs for Hong Kong's industrial and commercial sectors have jumped 50% since the start of the US-Israel war with Iran, according to an oil industry executive. Distributors are expected to pass higher fuel surcharges on to customers, raising prices across the economy.
The chairman of Hong Kong's Petroleum Distributors Association stated that industrial and commercial operating costs have surged 50% since the Iran war began, with energy costs the primary driver. Jet fuel, bunker fuel, and petrol prices have shot up, hitting shipping firms, construction companies, and power generators hardest. Shipping surcharges are being passed on to supply chain customers through elevated freight rates.
Distributors are preparing to pass fuel surcharges to end customers as subsidies run dry. Even with government fuel subsidies in place, the retail price of petroleum products is expected to rise significantly. Tanker congestion at Singapore and Hong Kong ports has begun delaying deliveries, exacerbating inventory pressures and pushing up carrying costs.
Surveys show 70% of Hong Kong's manufacturing SMEs report margin compression from cost increases. Electronics, steel fabrication, and chemical industries are most impacted. Local economists warn that if oil prices remain elevated, Hong Kong's inflation could breach 2%, eroding the purchasing power of consumers and potentially forcing the HKMA to reconsider its dollar peg strategy if divergence with US rates widens further.
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