Coronavirus is now impacting new continents in a bigger way.
Over the weekend, confirmed cases of COVID-19 in Italy, as the novel coronavirus is officially known, surged from a few cases on Friday to more than 200 by Monday, with as many as seven confirmed deaths as of publication time. According to the World Health Organization’s (WHO) situation report Monday, there were 48 new cases reported in Italy in the past 24 hours.
“Outside China, there are now 2,074 COVID-19 cases in 28 countries and 23 deaths. The sudden increases of cases in Italy, the Islamic Republic of Iran and the Republic of Korea are deeply concerning,” WHO director general Dr. Tedros Ghebreyesus said Monday.
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The U.S. now has a total of 14 confirmed cases, according to the Centers for Disease Control and Prevention (CDC), and President Trump tweeted Monday that “the Coronavirus is very much under control in the USA…,” despite the White House reportedly preparing to seek additional financing from Congress to support the country’s response to the epidemic.
Releasing its own situation report of sorts, McKinsey & Company said last week that while factories have begun reopening, “it is unclear if there is much production activity restarting.”
According to the global consultancy’s estimates, initial reports suggest between 10 percent and 30 percent of staff have returned to work at reopened factories.
“Restart is expected to take a slow, staggered approach, over at least 5 weeks,” McKinsey said. What’s more, “while restarts have been announced, transportation challenges for migrant workers, supply chain lock ups, and ongoing public concern over the virus, may slow down the restart.”
Some areas of China are seeing some normalcy resume at a quicker clip than others. In Guangdong and Zhejiang, manufacturing activities are getting back online more rapidly, according to McKinsey. Beyond the most impacted Hubei province where the coronavirus first surfaced, production resumption has been slow-going in places like Shandong and Shanghai, which is home to some apparel manufacturing operations.
While the impact on the supply chain certainly varies by manufacturing sector, textiles, apparel and leather are among the most exposed. For the clothing sector, according to McKinsey data, China holds a 41 percent share of global exports—the most among all of the sectors mentioned. For intermediate goods, like raw materials, China holds a 32 percent share. For context, China holds a 30 percent share of global exports of computer, electronic and optical products and a 28 percent share of the intermediate products in that category. Even its economic exposure isn’t as severe as the textile sector’s.
Raw material tie-ups have already begun to plague neighboring and nearby manufacturing countries, like Vietnam, Cambodia, Myanmar and Bangladesh, with some factories facing closure and projecting their present raw material stock may only get them through the end of March if production doesn’t resume to restore supply.
So far, it doesn’t look like supply chains have yet reached peak crisis.
Per its evaluation of several scenarios, McKinsey said if new coronavirus cases peak by Feb. 29, supply chains would be “temporarily affected, but economic activity resumes across most sectors/industries within weeks or months.”
If it takes longer than that, then “China restarts economic activity within next 4-6 weeks, in a controlled setting, especially in certain provinces (Guangdong, Shandong) and in certain sectors critical to global supply chain and/or less vulnerable to outbreak impact (e.g. semi-conductor, automotive); acute impact persists for several months in Hubei province and in tertiary sectors such as travel, hospitality, leisure,” McKinsey said.
In the worst-case scenario, where the disease doesn’t peak until Q3 2020 and sees “exponential growth in additional key hotspots,” beyond being a trigger for a global economic recession, it could force companies to “make irreversible decisions such as wholesale shifts in supply chain, distribution channels,” breaking the supply chain in certain sectors, in particular, McKinsey said.
