- Trade market is passing through a period of disruption forced by the coronavirus outbreak, affecting physical supply chains.
- Outbreak has a negative impact upon exports coming from China to the U.S. and Europe.
- The signs indicate a major dislocation in global supply chains and commodity trade, with situation expected to get worse for some products.
- The disruption to the 90% trade transported through the sea is expected to impose a drop in imports at U.S. retail container ports during February.
- Chinese LPG demand expected to drop by 3%, leading to cut in the LPG shipments affecting the freight rates.
- Asian currencies were falling against the dollar amid concerns over the economic impact from the coronavirus outbreak.
- Auto China 2020, the sprawling event scheduled for April 21-30 in Beijing, would be moved to an undetermined date.
The coronavirus outbreak is forcing the trade market to pass through a period of disruption. An article published in Safety4Sea says, the outbreak has kept shipping companies skipping Chinese ports and many Chinese factories shutdown. According to Bloomberg, physical supply chains are affected due to the above-mentioned situation.
Negative impact upon exports from China
The coronavirus has a negative impact upon exports coming from China to the U.S. and Europe. In fact, handbags, TVs and plastic toys exports have been escalated during February.
Toy makers struggle
With the Chinese market playing a major role in global shipping, Bloomberg reported that the coronavirus disruptions have left toy makers fighting with their supply chains.
Moreover, the toy maker Hasbro reported that the virus disrupts its commercial operations in China, affecting its earnings.
Dislocation in global supply chains
Caroline Bain, chief commodities economist at Capital Economics said that all the signs indicate a major dislocation in global supply chains and commodity trade. For some products it is expected to get worse in February data.
Drop in february
As 90% of all trade transported through the sea, the National Retail Federation (NFR) and the Hackett Associates recently issued their “Global Port Tracker” report, informing that imports at U.S. retail container ports are expected to experience a drop during February.
Boxes quit operations ‘Blank sailings’
According to Alan Murphy, chief executive officer of container shipping analysis company Sea Intelligence, around 600000 20-foot boxes have quit their usual operations. This is an increase from last week’s amount.
AP Moller-Maersk A/S
In light of the situation, one the largest shipping companies. AP Moller-Maersk A/S has already 27 blank sailing since 31st of January.
LPG demand drop
Apart from the retailers, coronavirus may drop the Chinese liquefied petroleum gas demand by 3%. This will lead to cut in the LPG shipments and will affect the freight rates.
China’s crude oil import
China’s crude oil, iron ore and coal imports are at levels well below the preceding months for February and also from the same month last year.
Delivery delays
According to the Xinhua news agency, the shipbuilding industry will experience some delivery delays, as some of the largest private shipyards in China still remain closed.
Asia stocks
Though the coronavirus outbreak seems to be slowing down, Asia stocks opened to the downside Tuesday, according to a Market Watch report.
Lost output never recovered?
China’s first-quarter gross domestic product may fall 2.5% from the fourth quarter of 2019 following the pause in economic activity caused by the coronavirus outbreak.
Capital Economics (CE) estimates and warns that “a prolonged shutdown could mean lost output is never recovered.”
Spreading disruption
According to CE, the economic disruption is starting to spread to neighboring economies through supply chains.
Imports to Korea
CE notes that imports to Korea during the first ten days of this month fell by nearly 50% on year, the biggest fall since Asian financial crisis in 1997 and larger than the drop experienced at the height of the global financial crisis.
Fall of Asian currencies
Asian currencies were also falling against the dollar amid concerns over the economic impact from the coronavirus outbreak. AxiCorp advised investors to remain cautious about adding more currency risk before assessing the depth of the economic fallout.
This month’s data
The first data that may provide a “barometer” of how the month is panning out could be
- South Korea’s 20-day exports due on Feb. 21, AxiCorp adds.
- USD/SGD is up 0.1% at 1.3911, USD/CNH is up 0.2% at 6.9966 and USD/THB is up 0.2% at 31.25.
- Japan’s Nikkei index and Hong Kong’s Hang Seng were bearing the brunt of early day declines, with the Nikkei NIK, -1.40% off 1.2% and
- the Hang Seng HSI, -1.54% down nearly 1.4% in early trades. Stocks in China 399106, +1.12% SHCOMP, +0.05% were off about one-half a percent.
Auto China 2020
The organizers of Auto China 2020 said in a statement dated Monday that the sprawling event originally scheduled for April 21-30 in Beijing would be moved to an undetermined date.
The Auto China show has taken on increasingly heft as global manufacturers seek to grow their sales in China’s massive, but recently slowing, market for cars, trucks, vans and luxury vehicles.
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Source: Safety4Sea, MarketWatch
