Thursday, 20 February 2020

China's coronavirus disrupts flow of global business.

Empty Shelves: Coronavirus 

Shortages Could Hit Stores 

by April



Seemorerocks



This article is aimed at people who are not aware of what is likely to happen in the case that supply chains are disrupted, say in the case of economic collapse, something I have been writing about for nearly 11 years.


Nothing, however, could have prepared me for the news of a major viral disease outbreak in China.


Even though I have been aware of the seriousness of this since the first information of this came out and have been warning folk throughout that period the media has been in denial and is only now starting to catch up. The Chinese, however, are putting out propaganda saying that everything is returning to normal - something you would have to be a fool to believe.


In writing this I am going to put aside the likelihood that this disease is going to reach our shores and pretend it is not happening and instead concentrate on what is already in the pipeline.


As usual the NZ media is absolutely silent about this. One might have thought that the business press in this country might be onto it like it is elsewhere in the world. However, as we can see, as always, there is almost total denial of reality.



A majority of people may think the best way to get through life is to bury one's head in the sand and pretend but I am not one of those people.





The following, from Reuters, reflects Chinese propaganda but the following stories point to a very different reality.

https://www.reuters.com/article/us-china-health-economy/chinas-virus-hit-industrial-cities-start-to-ease-transport-curbs-restore-production-idUSKBN20D0PB

Today, China accounts for approximately 20 percent of global GDP, but that doesn’t tell the entire story.  At this point the rest of the world has become so dependent on Chinese exports that any sort of an extended shutdown for Chinese manufacturing would be a complete and utter nightmare for global supply chains.

Take this, for example:

https://www.cnbc.com/2020/02/17/coronavirus-could-impact-5-million-companies-worldwide-research-shows.html


We have become used, over the years, to access to "Chinese junk" that fill every shop in the country. We have become used to an interconnected world with open borders without ever stopping to reflect on what that really means. The "neo-liberal" order has become beyond question.

I have taken a few headlines, just from today that illustrate this.

It will take a couple of months for us to see the consequences so that we are only likely to see things kick in at the end of March or beginning of April.

If I am reading this correctly this is not a possibility but a certainty (unless the Chinese propaganda is correct and what follows is "fake news", that is).

Already, there have been reports about the effects of the coronavirus on international shipping, an indicator of the health (or otherwise) of the REAL economy.

https://www.zerohedge.com/economics/virus-shock-crashes-baltic-dry-global-recession-fears-surge
This is what the US Food and Drugs Administration (FDA) is saying:



https://www.fda.gov/news-events/press-announcements/fdas-actions-response-2019-novel-coronavirus-home-and-abroad


I have taken some screenshots of various headlines that illustrate this.
All of the talk is about shortages of medical equipment but bar a miracle this will go through everything that we get from China.


Shoppers could start seeing empty store shelves as soon as mid-April due to the coronavirus outbreak, according to Wells Fargo analysts who say concern about the supply chain is rising among retailers.

Store closures and guidance cuts have been the primary impact of the outbreak on the retail sector thus far, leaving the supply chain largely unaffected.

Wells Fargo said that inventories are healthy at the moment, thanks to retailer efforts to get ahead of tariff issues and the Lunar New Year. Moreover, merchandise for spring and summer has shipped.

That being said, our sources indicate that out-of stocks at retail for replenishment product could start within 60-to-90 days if disruptions continue beyond the next few weeks, with more significant inventory issues in seasonal product possibly by midsummer if disruptions stretch longer,” wrote analysts led by Edward Kelly.

Analysts say that retailers have been looking to other parts of Asia for their production needs, but raw materials come from China.


Businesses have started to reopen after the Lunar New Year break, but reports say many consumers have continued to stay home. Cases of coronavirus and deaths from the disease have spread beyond China’s borders.

Most people in this country are totally oblivious of the need to have masks on standby but even if they were there are none to be had anywhere.




This was illustrated by a story Rick Wyles of TruNews told. He tried to order some freeze-dried food. After ignoring those items that were listed as being "out-of-stock" he decided to concentrate on what was available. When he put in the order he was told there would be a 5 week delay because the goods were not available.


China is struggling to get its more than a billion workers back on the job amid the continuing COVID—19 outbreak. A new survey reveals the extent of that tough task.

As investors watch closely to see how quickly China can get its more than one billion workers back on the job amid the continuing coronavirus outbreak, a new survey reveals just how tough a task that may be.


According to a mini survey by the American Chamber of Commerce in Shanghai, 78% of companies say they don’t have enough staff to run a full production line. The business organization surveyed its members with manufacturing operations in Shanghai, Suzhou, Nanjing and the wider Yangtze River Delta last week and received 109 responses.


Shoppers could start seeing empty store shelves as soon as mid-April due to the coronavirus outbreak, according to Wells Fargo analysts who say concern about the supply chain is rising among retailers.

Store closures and guidance cuts have been the primary impact of the outbreak on the retail sector thus far, leaving the supply chain largely unaffected.

Wells Fargo said that inventories are healthy at the moment, thanks to retailer efforts to get ahead of tariff issues and the Lunar New Year. Moreover, merchandise for spring and summer has shipped.


That being said, our sources indicate that out-of stocks at retail for replenishment product could start within 60-to-90 days if disruptions continue beyond the next few weeks, with more significant inventory issues in seasonal product possibly by midsummer if disruptions stretch longer,” wrote analysts led by Edward Kelly.

Analysts say that retailers have been looking to other parts of Asia for their production needs, but raw materials come from China.


Like many other American staples and luxuries, L.O.L. Surprise! dolls are made in China. Chatsworth-based MGA Entertainment has them manufactured in Guangdong province, trucked to the port in Yantian Harbor, loaded on ships and brought to the United States, where the popular toys are distributed to retailers and scooped up by eager children. The process went smoothly for years.

Then the coronavirus outbreak hit, and the supply chain stuttered.

The situation is “a disaster, frankly,” MGA Chief Executive Isaac Larian said. Production of his company’s toys has dropped 60% compared with this period last year. To get by, he said, he is filling only partial toy orders — “if a retailer wants 100,000 pieces, we’re giving them 15,000 or 20,000.”


Businesses of all stripes in California and nationwide are feeling pain from the coronavirus outbreak, which has killed 1,775 people and infected more than 71,300 others worldwide, mostly in China.

https://www.latimes.com/business/story/2020-02-17/coronavirus-impact-economy-business
***

I have always been aware of India has a manufacturer of generic drugs but something that I was completely unaware of until a day or so ago is that it is completely dependent on China for the ingredients.

Tata Motors-owned Jaguar Land Rover has flown in auto parts in suitcases as the effects of coronavirus take a toll on the luxury carmaker's supply chains in coronavirus-hit China.

The company on Tuesday warned that its production schedules in the UK as well as India are under strain due to its supply chains in China, known as ''the world's factory''.

The virus has killed over 2,000 people in China sparking a shutdown that has seen factories close across the country.

JLR CEO Ralf Speth said the company has enough supplies to ensure production for the next two weeks, but from the third week onwards it remains risky and could even mean plant closures.

"We have flown parts in suitcases just to make sure we have all the parts but for the third week, we still have parts missing," Mr Speth said.


Shortages and potential price increases of generic drugs from India loom if the coronavirus outbreak disrupts suppliers of pharmaceutical ingredients in China past April, according to industry experts.


An important supplier of generic drugs to the world, Indian companies procure almost 70 per cent of the active pharmaceutical ingredients (APIs) for their medicines from China.

https://www.ndtv.com/business/generic-drugmakers-may-face-supply-shortages-from-china-if-coronavirus-drags-on-2180136
***
All the research I have done points to something catastrophic taking place in China. With half the population under either partial or total lockdown it is highly unlikely that China is going to recover any time soon.

This is a major shock for the world economy.

In that context I regard it as prudent to start to buy in supplies of food, medicines and other necessities. In the unlikely (in my view) eventuaity this turns out to be nothing you will be left with a store of food. I see nothing wrong with that.


In conclusion I would like to leave you with this, put out by the American Trucking Association


When Trucks Stop, America Stops

Just In Time: When the Trucks Stop, America Will Stop ...

Quarantines mean no one in, and no one out.

That means no trucks for deliveries.

According to an analysis of the United States transportation network, performed by the American Trucking Association, here's what "No trucks" turns into:

Here's a link to the full study by the American Trucking Association (HERE)

1 comment:

  1. Great post I would like to thank you for the efforts you have made in writing this interesting and knowledgeable article Coronavirus

    ReplyDelete