The disruptions in factories in China caused by coronavirus break the supply chain and prevent production at industrial plants around the world. This, in turn, leads to reduced fuel production. Moody’s warns of the global crisis.

Further spread of coronavirus outside China could have serious economic consequences,” warns Atsi Sheth, Moody’s Managing Director.

The direct effect of coronavirus can be seen primarily in mining companies, since more than half of the world’s steel production and copper consumption takes place in China,

The next sector to receive the first hit is automotive. The car manufacturers – Nissan, Hyundai, Toyota, BMW and Volkswagen – also decided to extend the New Year’s break in Chinese factories. 

We will consider resuming activities based on an analysis of the spread of the virus and the impact of the epidemic on the supply chain,” said the Nissan representative to the Kyodo agency.

Bosch and Webasto made a similar decision. 

Broken supply chain worldwide

Due to coronavirus, many electronics manufacturers also decided to suspend production in China. 

 Huawei (and its brand Honor), Xiaomi, Lenovo, ZTE, Realme and Vivo have started to change delivery dates for new devices. Russian telecom operators allegedly received a letter from their partners that they were interrupting shipments due to the coronavirus epidemic because it forced the factories to extend the celebration of the Chinese New Year to 10 February,” reports “Rzeczpospolita”. And it adds that the Chinese warn that this period might get extended. 

According to US media reports, Apple, too, may experience significant supply chain disruptions due to the dangerous virus spreading in China. 

Shippers will pay more for transport

In addition, due to stringent inspections resulting from the epidemic, customs clearance in China takes much longer. This in turn leads to further delays in delivery,” alerts the German logistics and transport union DSLV. 

“Due to current capacity constraints, sea and air freight rates are increasing, so shippers have to expect additional freight transport costs depending on their quantities and destinations,” explains DSLV CEO, Frank Huster.

Uncertainty exists primarily due to short-term recommendations by the Chinese authorities, which may result in further regional production shutdowns and ultimately a continued decline in Chinese exports,” adds Huster.

Suspended flights and rail connections

Due to the spread of the virus, many airlines have decided to stop flying to mainland China. These include British Airways, SAS and Air France, as well as Lufthansa, Swiss and Austrian Airlines. LOT Polish Airlines also suspended air operations to China, which in turn led to the suspension by the Polish Post Office of accepting shipments to the Middle Kingdom.

Russia, on the other hand, has suspended rail connections with China. The Russian state railways stopped passenger trains on the renowned Trans-Siberian route from Moscow to Beijing on the night of 2nd February.

Coronavirus has weakened the demand for oil

The oil-producing countries could reduce production by 1 million barrels per day to mitigate the impact of coronavirus on the sector. 

According to Bloomberg, it is estimated that after the virus outbreak, the demand for oil fell by 20%. This is because China is the world’s largest importer of oil, consuming up to 14 million barrels a day.

Photo: Pixabay

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