How Can the Coronavirus Affect Your Business?

So far, there are around 70,000 confirmed cases of COVID-19, the new coronavirus that emerged in Wuhan, China, in December and is spreading around the world. The virus which has now spread to over 25 countries has officially been declared as a global health emergency by the World Health Organization and has sent alarm bells ringing across global capital markets.

Businesses across China have already been affected with closures to prevent infection. These interruptions to the supply chain are yet to be felt by Europe and the US, however they are to be expected. On a macro level, economic consequences of such an outbreak are profound. China is the biggest exporter and second biggest importer of merchandise, playing a crucial role in the global supply and demand value chain. Long term disruption caused by this outbreak could cause substantial damage to the economic growth of the country.

According to a Reuters poll of economists, due to this virus, China’s economic growth is expected to slow by 4.5% in the first quarter of 2020 and this is the slowest pace since the financial crisis. While the International Energy Agency says the “Global oil demand has been hit hard by the novel coronavirus”.

Factory shutdowns are slowing the flow of products and parts from China, affecting companies around the world, including Apple and Nissan. The inevitable slow down of construction activity and consumption in China may keep the demand for base metals such as steel, aluminium and copper low, putting a downward pressure on global metal prices, which will spill over into the domestic market. Metal prices have already plummeted in the global market and the Chinese supply-demand factors decrease has kept global inventories of metal products high, which is likely to weigh down on prices of steel, aluminium and copper.

Many businesses around the world would have to deal with lost revenue and disrupted supply chains due to China’s factory shutdowns as tens of millions of people remain in lockdown in dozens of cities and other countries extending travel restrictions. Even the Coca-cola company has just recently announced that there may a shortage of coke Zero and Diet Coke worldwide because the sweeteners used for them are sourced from China.

The virus however, is set to benefit some global buyers, such as the UK and USA who are turning to other countries such as India for exporting of goods, seeking to replace China as a supplier. Also, while the falling crude prices will not benefit countries like Nigeria, it will definitely be of benefit to manufacturers of paints and plastics with shares in major players likely to benefit.

Despite the above business disruptions worldwide, analysts have said that the stock markets will not see any long-term damage. Other major infections such as Ebola, SARS, Ziki and swine flu also caused similar growth forecast changes however quickly bounced back after around 6 months.

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