China's industrial growth forecasted to drop due to virus © Stringer/Anadolu Agency/Getty Images
China's industrial growth forecasted to drop due to virus © Stringer/Anadolu Agency/Getty Images

Hyundai and Airbus latest to be hit by coronavirus

5 February 2020

Hyundai Motors and Airbus are among the latest businesses to be hit by the coronavirus.

Hyundai closed seven factories in South Korea, which make up 40% of global output, but expects to reopen them on 11 February.

The closures were due to a shortage of wiring harnesses, used in electrical systems, a Hyundai Motor union official told Reuters.

Many of Hyundai's suppliers are based in China, including firms Kyungshin and Yura Corporation.

Hyundai is the first auto manufacturer to close factories outside China, with other carmakers hit by the coronavirus including Toyota, Honda Motor, PSA Group, Volkswagen, General Motors, Ford and Tesla.

Tata Motors expects the virus will hinder production in China, according to Reuters, and Tesla warned of a 1-1.5 week delay in a planned increase of production of its Model 3 cars, built in its Shanghai factory, after China forced a shutdown.

On Wednesday, aeroplane manufacturer Airbus announced the closure of its aircraft factory in Tianjin, northeastern China, which works on single aisle A320 aircraft and larger A330s, according to Channel News Asia.

Separately, tech firm LG Display said the outbreak was increasing uncertainty for suppliers, but it hasn’t closed Chinese factories, said Reuters

The Chinese Ministry of Commerce said on Monday that “foreign trade enterprises in China will resume production capacity soon, while authorities are stepping up efforts to improve the business environment and reduce their burden”, according to state news agency Xinhuanet.

Lao’s exports to China, estimated at around $1.5bn, are not expected to change, according to the Import and Export Department at the Lao Ministry of Industry and Commerce.

China is Lao’s second largest trading partner and its biggest foreign investor, according to Xinhuanet, with main exports to China including ore sand, rubber and rubber products, copper and copper products, bananas, maize and fertilisers.

Commodity markets are being hit by fears over the impact of the coronavirus on mainland Chinese demand, according to IHS Markit. 

Metals such as aluminum and steel were highlighted as vulnerable markets due to a forecast drop in production due to lower demand and market volatility.

IHS Markit said copper prices had fallen by 8% – $500 per tonne – in the last two weeks of January. Assuming reduced Chinese demand, IHS Markit said a drop in the country's industrial growth from 5% to 4% would lower metals prices by around $150 a tonne.

“Any correction in prices may therefore present a buying window. This already appears to be the case in copper. For fuels and certain petrochemicals, even better pricing may lay ahead,” said IHS Markit.

Alejandro Alvarez, partner of operations performance at supply chain consultancy Ayming, warned: “When it comes to supply chains, the ripples of the coronavirus are only just emerging. It's very difficult to get a full grasp on the matter and many companies could be underestimating their exposure. 

“However, this outbreak actually provides a valuable lesson. As it stands, most businesses are far too dependent on one or two main sources for their supplies. Companies must learn from this and build resilient supply chains by diversifying their sources. If a business has a number of suppliers for the same product, they have an insurance policy should things go wrong – and, clearly, things do go wrong.”

Alvarez added that global manufacturers will have to pay closer attention to components or material imports coming from China as there may be some surprises in store should import restrictions and containment efforts escalate.

There are 24,642 confirmed cases of the coronavirus and 493 deaths, spanning 28 countries worldwide.

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