The disruption to global supply chains caused by the coronavirus outbreak could last until 2020 Q3 as new cases climb again, according to Verisk Maplecroft.
The coronavirus has caused significant disruption to global supply chains across the petrochemical, machinery, automotive and high-tech sectors. Several of the affected regions – including Hubei, Guangzhou, and Shenzhen – are manufacturing hubs.
“Multinational companies that rely on China as a core supplier face reduced production output in products such as plastics, chemicals, steel, auto parts and hi-tech components,” said Dr Kaho Yu, a senior Asia analyst in Verisk Maplecroft’s politics team.
“They will then have to compete for alternative suppliers and even be forced to reduce or stop production. For example, factory closures have forced Apple and Bosch to scale down their planned production targets.”
The People’s Bank of China injected 1.7 trillion yuan of liquidity into the market on 3 February and cut interest rates by 10 basis points in an attempt to soften the economic impacts of the outbreak. The National Energy Administration has also urged coal miners to resume production to keep the market supplied – something that Dr Yu believes could see cases spike further as workers return to crowded environments.
But the ongoing transport lockdown could also prevent facilities from obtaining materials and equipment, and many businesses might still experience operational delays. And while it seemed as though new cases of the coronavirus were beginning to level out, new techniques for diagnosing the virus saw cases spike by more than 14,000.
“The final impact on industries will depend largely on companies’ capability to source alternative suppliers as well as the progress of virus containment worldwide,” Dr Yu said.
“Many US businesses that have already diversified their supply chains due to large tariffs on Chinese goods are likely to face less of an impact from the supply chain disruption in China.”
Stimulate new ideas. Stimulate new thinking. Top up your CPD and hear from industry experts with InvestorDaily’s Knowledge Centre. Keep up to date with the latest trends and reforms, all while adding to your CPD. Explore the knowledge centre Knowledge Centre now.
Despite unemployment falling to pre-pandemic levels, the central bank still thinks it’s too early to count its chickens on the success of ...