Coronavirus: Pressure grows to re-open factories

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Chinese employee working in factoryImage source, Getty Images

Companies around the world are waiting for China to re-open its factories and plants on Monday.

If this does not happen, major brands from car makers to tech giants will struggle to make their products.

Inventories are already running low following widespread shutdowns at Chinese factories forced to close to prevent the spread of the coroanvirus.

China, known as the factory to the world, plays a crucial role in the global supply chain and world economy.

Apple is one brand that could face shortages with the two major assemblers of its iPhone - Foxconn and Pegatron - based in China.

A Chinese woman in a shopping mall in Shenyang wears a face mask.
Getty Images
Coronavirus threatens smartphone sales

Experts predict notable impact on the smartphone industry in the first quarter of the year.

  • 4 millionestimated fall in iPhone shipments in 1st quarter of 2020

  • 32%predicted drop in Chinese smartphone shipments in Q1 of 2020

  • 5%predicted drop in Chinese smartphone shipments across 2020

Source: TF International Securities, Strategy Analytics

The tech giant has closed its stores and office in China as it monitors the situation.

Chinese authorities told companies to extend the Lunar New Year holidays until 10 February to contain the deadly virus from spreading further.

The concern now is of further delays as some local authorities urge factories to remain closed.

''I am quite sure Monday is not realistic, even if virus data are suddenly suggesting that might just be possible. Many people are thinking April is more realistic for the virus peak,'' said Michael Every, head of financial markets Asia-Pacific for Rabobank.

The impact has already been felt from the extended shutdown in China's manufacturing sector. Hyundai, the world's fifth biggest carmaker, has been forced to halt production in South Korea as it had run out of parts from China.

A worker in Hyundai's Cangzhou factory in China tightens screws on a vehicle.
Getty Images
Coronavirus outbreak hits automotive industry

Hyundai halts South Korean factories due to parts shortages from China, while Volkswagen (VW) and BMW suspend production in China.

  • 37%of Hyundai's cars are made in South Korea

  • $660 millionmade per work day by the German automotive industry in China

  • 40the number of German car and partsmakers' plants in China

  • 100,000people are employed by Volkswagen in China

Source: Hyundai, Bernstein

Other car makers face similar challenges with Tesla, Volkswagen and Toyota all warning they expect disruptions.

''Every factory faces this same issue,'' said Iris Pang, Greater China economist at ING. ''The shutdown affects not some particular companies but manufacturing as a whole as it is still uncertain how many factory workers will return to their factory after the extended holiday''.

The economic fallout from the coronavirus outbreak is spreading far and wide, moving across China's manufacturing sector, major airlines and now global supply chains.

Theme parks and casinos have been forced to close their doors including Disneyland theme parks in Shanghai and Hong Kong, which will be shut for two months.

This week casinos in Macau, the world's biggest gambling hub, were asked to temporarily close while Starbucks and McDonalds are among the major food chains to shut outlets.

Wynn Resorts said it is losing about $2.5m a day in Macau by remaining closed. The casino employs about 12,000 people in the region.