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COVID-19 Coronavirus Supply Chain

COVID-19 (Coronavirus) and the Global Supply Chain: 5 Things to Know

COVID-19 has affected a wide array of industries and their supply chains. A February 7 article in Forbes reported that 421 global companies, including 394 based in the United States, had discussed the COVID-19 outbreak in China during calls about first-quarter earnings. Their conclusion? The virus could have a negative impact on financial performance for that timeframe.

rfxcel is monitoring news about COVID-19. Below, we summarize five of the most recent developments. As we all know, the situation is changing every day — as do the key takeaways about how the virus is affecting global supply chains — so these are snapshots, not analyses, predictions, or conclusions.

We’ll continue following the situation, so check back often for updates.

1. Monday, Feb. 24: Potential U.S. Supply Chain Disruptions as More COVID-19 Cases Reported in China, Japan, and South Korea

China, Japan, and South Korea are major U.S. trading partners. Combined, these countries accounted for more than 25% of total American imports in 2019. Let’s break down the numbers from the U.S. Census Bureau to get an idea of the potential impacts on U.S. supply chains if factories in these countries were shut down for long periods.

China: No. 3 in total trade value in 2019
    • From 2018 to 2019, China’s trade with the United States fell 15.15 percent, from $654.36 billion to $555.25 billion.
    • In 2019, exports totaled $106.63 billion and imports totaled $448.62 billion (deficit of $342 billion).
    • Top 10 exports: civilian aircraft, parts; computer chips; soybeans; motor vehicles for transporting people; machinery, parts for semiconductor manufacturing; medical instruments for surgeons, dentists, vets; oil; plasma, vaccines, blood; medical equipment for physicals; medicines in individual dosage
    • Top 10 imports: cell phones, related equipment; computers; toys, children’s bicycles, games; TVs, computer monitors; motor vehicle parts; furniture, parts; seats, excluding barber, dental; electric water, space, soil heaters; lamp and lighting parts; computer parts
Japan: No. 4 in total trade value in 2019
    • Trade totaled $218.29 billion. Exports totaled $74.65 billion and imports totaled $143.64 billion (deficit of $68.98 billion).
    • Top 10 exports: civilian aircraft, parts; petroleum gases, other gaseous hydrocarbons; medical instruments for surgeons, dentists, vets; medicines in individual dosages; corn; machinery, parts for semiconductor manufacturing; pork meat, fresh, frozen or chilled; coal, briquettes; plasma, vaccines, blood; oil
    • Top 10 imports: motor vehicles for transporting people; motor vehicle parts; machinery, parts for semiconductor manufacturing; self-propelled heavy construction machinery; defense-related aircraft, parts; printers, all types, parts; value added to a returned import; medicines in individual dosages; motor vehicle engines; aircraft engines, engine parts
South Korea: No. 6 in total trade value in 2019
    • Trade totaled $134.41 billion. Exports totaled $56.9 billion and imports totaled $77.51 billion (deficit of $20.61 billion).
    • Top 10 exports: oil; machinery, parts for semiconductor manufacturing; computer chips; petroleum gases, other gaseous hydrocarbons; civilian aircraft, parts; motor vehicles for transporting people; frozen beef; medical instruments for surgeons, dentists, vets; gasoline, other fuels; acyclic alcohols
    • Top 10 imports: motor vehicles for transporting people; motor vehicle parts; gasoline, other fuels; computer parts; cell phones, related equipment; computer chips; plasma, vaccines, blood; unrecorded media for audio; rubber tires; refrigerators, freezers

2. Monday, Feb. 24: Shanghai introduces measures to help companies resume production and mitigate impact of COVID-19 outbreak

Local authorities in Shanghai’s Pudong New Area have introduced rent reduction, rent exemption, and other policies to help companies affected by the virus. The Pudong New Area is home to the Lujiazui Finance and Trade Zone and the Shanghai Stock Exchange, as well as the Port of Shanghai, the Shanghai Pudong International Airport, and the Zhangjiang Hi-Tech Park.

The Pudong New Area State-owned Assets Supervision and Administration Commission said more than 1 billion yuan (approximately $142 million) in rent reduction and exemption would benefit about 8,000 companies in the industry, retail, commerce, and technical services sectors.

According to officials, 66 percent of industrial enterprises, 93 percent of software information service companies, and more than 85 percent of foreign trade enterprises have resumed work in this key economic area.

In the nearby Lingang Special Area of China (Shanghai) Pilot Free Trade Zone, 971 companies have resumed operation and more than 40,000 employees have returned to work. Key sectors here include integrated circuits, artificial intelligence, biomedicine, aerospace, and new energy vehicles.

3. Friday, Feb. 21: Chinese President Xi Jinping says manufacturing supply chains should get help to resume output

At the meeting of the Communist Party Politburo on February 21, the Chinese president said the country must work to both contain the spread of COVID-19 and ensure that industry can resume output and meet economic targets. These comments came as businesses question Chinese suppliers’ ability to meet demand and consider finding other places to source materials.

“Priority should be given to ensure leading companies that are important in the global supply chain restore production and supply, maintaining the stability of the supply chain,” he said to the 25-member Politburo. “It is necessary to help key export enterprises resume work and production as soon as possible.”

4. Monday, Feb. 17: China has issued 1,600+ “force majeure certificates” to protect companies from legal damages arising from the COVID-19 outbreak

The China Council for the Promotion of International Trade (CCPIT) has issued 1,615 force majeure certificates to companies in more than 30 sectors, covering a total contract value of 109.9 billion yuan (approximately $15.7 billion).

Furthermore, China’s Ministry of Commerce has instructed six trade associations in the healthcare, textile, machinery, mining and other sectors to help with legal counseling and applying for the certificates.

A certificate protects a company that does not perform or only partially performs contractual duties by proving it is being affected by circumstances that are beyond its control. The CCPIT says its certificates are recognized by governments, customs organizations, trade associations ,and enterprises in more than 200 countries and regions.

5. Tuesday, Feb. 11: Dun and Bradstreet release white paper about COVID-19’s effect on global business

Here’s what the commercial data and analytics company estimates:

    • Approximately 90% of all active businesses in China are in the regions affected by COVID-19.
    • At least 51,000 companies around the world have one or more direct or Tier 1 suppliers in the affected region; 163 of these are Fortune 1000 companies.
    • At least 5 million companies have one or more Tier 2 suppliers in the affected region; 938 of these are Fortune 1000 companies.
    • Currently, 49,000 businesses in the affected region are branches or subsidiaries of companies headquartered outside China. Nearly half of these are based in Hong Kong, 19% are in the United States, 12% in Japan, and 5% in Germany. Other countries include the United Kingdom (including the Virgin Islands), the Cayman Islands, the Netherlands, Switzerland, and France.

 

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