Dive Brief:
- Eighty-seven percent of U.S. companies operating in China expect coronavirus to impact 2020 revenues, according to an announcement last week from The American Chamber of Commerce in Shanghai. Of those forecasting a drop, 24% expect it to fall by 16% or more.
- In contrast with The American Chamber of Commerce in Shanghai survey, which was conducted the first week of February, a survey conducted the last week in January by the Massachusetts Institute of Technology Center for Transportation and Logistics reported few respondents anticipated a major disruption in the next quarter — indicating disruption and concern are spreading quickly.
- Companies ranging from Apple suppliers to Nissan have announced plans to temporarily pause production as a result of the disease. "Uncertainty remains high, and our conviction in any particular forecast is lower than usual," Shaun Roache, the Asia-Pacific chief economist for S&P Global Ratings, said in a release Monday.
Dive Insight:
Nissan announced Monday plans to temporarily pause production at one of its Japan factories for Friday and next Monday with plans to restart production immediately thereafter, according to Bloomberg. The company said supply shortages were to blame.
Facilities outside China, including Hyundai, have closed in some cases, but the trend is not expected to extend beyond China, according to an analysis by Verisk Maplecroft.
The majority of companies stopping operations are in Wuhan, China, according to the Nikkei Asian Review, which is tracking stoppages with filings on regional stock exchanges.
Suppliers are wary about reopening facilities where employees would be working in close quarters and living together in dormitories.
Hyundai and Kia shut down manufacturing in South Korea last week, but are expected to begin operations again this week. The "facilities will be flexibly operated in line with parts supply status," the companies told Reuters.
Factory shutdowns have businesses worried about wait times for inventory. One company that tracks third-party sales on Amazon said it has seen an uptick in out-of-stock status on the site, according to Reuters. Amazon has been encouraging those impacted to place their account on "vacation" mode if inventory is unavailable.
The apparel sector is also keeping an eye on the virus. VF Corporation, which owns brands including The North Face and Vans, said in a statement that "while it is not possible to gauge the impact to our supply chain at this point, approximately 16 percent of VF's total cost of goods sold is sourced directly from mainland China."
"The next two weeks will be crucial for determining whether the coronavirus outbreak can be contained amid a resumption of business," Verisk Maplecroft concluded in its research note. "If containment measures are not effective, Beijing will likely delay the 13th National People's Congress, a top legislative meeting scheduled for early March."
