US importers have reduced orders and are shifting to short-term contracts. This change is linked to a global oil crisis caused by the ongoing geopolitical tension in the Middle East. Business leaders in Hong Kong report that profit margins are falling and cash flow is becoming difficult to manage.

Businesses involved in aluminium products have reported fewer orders from the United States. Existing contracts continue at fixed prices, but new orders are becoming more expensive. Danny Lau Tat-pong of Kam Pin Industrial, “For potential orders still in the quotation stage, we have had to raise prices by around 5 per cent to offset rising oil prices.”

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Fuel costs have increased sharply, raising operating expenses for many firms. However, companies are not able to pass these higher costs on to buyers. This is affecting overall profitability. 

Jefferey Lam Kin-fung, Executive Council Member, said, “The situation is unclear and will definitely impact the cash flow of Hong Kong’s small and medium-sized enterprises, so we cannot sit idly by.”

The closure of the Strait of Hormuz has disrupted global energy supply. Oil prices have risen, which has increased transport and production costs. This has affected international trade and contract pricing.

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Transport and logistics costs have also increased. Air freight capacity has reduced, and routes have changed, which has increased freight costs, sometimes doubling them, and delivery delays are slowing payments, putting pressure on company cash flow.

To manage this situation, some firms are working with banks to adjust loan arrangements and maintain liquidity.

The jewellery sector is also affected. New orders have slowed as buyers are waiting. Existing orders are stable. Fewer buyers from the Middle East are expected at upcoming trade events.

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Some businesses have stopped travelling to the region and changed their operations. If oil prices stay high, prices may increase. Business leaders suggest expanding trade with Central Asia and ASEAN countries to reduce risk.

Despite these challenges, Hong Kong has seen increased capital inflows. It is viewed as a stable location during global uncertainty, attracting investment from other regions.