The Journal Gazette
Wednesday, February 12, 2020 1:00 am

Virus worries causing supply-chain problems

Associated Press

WASHINGTON – Chinese authorities are struggling to strike a delicate balance between containing a viral outbreak and restarting the world's second-biggest economy after weeks of paralysis.

As the death toll from the newly named COVID-19 illness topped 1,000, global supply chains remained widely disrupted for the businesses across the world that have built deep connections to China.

Mail service has been delayed after airlines suspended flights between China and the rest of the world. U.S. chip maker Intel and Chinese smartphone maker Vivo joined other tech giants in withdrawing from a major European technology fair over virus concerns.

Prices for oil, copper and other basic building- block commodities have tumbled on dwindling demand from China, often called the world's factory.

China alone accounted for half the growth in the world's oil demand last year, according to IHS Markit. It buys more than 40% of the world's iron ore, coal, nickel, aluminum, copper and finished steel, UBS says.

Shuttered factories and travel restrictions in China have contributed to a 20% drop in oil prices since Jan. 7, when Chinese authorities identified the new virus. Prices for copper, soybeans and even lean hogs have all fallen more than 6% over the same time.

Much of China remains on lockdown. Even factories that are open must contend with logistical bottlenecks and labor shortages as travel restrictions prevent employees from returning to work after the Lunar New Year. That's all worrisome news for multinational companies that have grown to depend on China for everything from auto parts to toys.

“This is the worst supply chain problem I've seen in 40 years,'' said Isaac Larian, CEO and founder of toymaker MGA Entertainment, which produces the popular LOL dolls. “There is no contingency plan.''

Retailers are increasingly concerned that shipments will not arrive in time for Easter and Mother's Day, which would force them to mark down the price of merchandise that missed its sell-by date.

“No one wants women's bonnets after Easter Sunday,'' said consultant Rick Helfenbein, former president and CEO of the American Apparel & Footwear Asociation.

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