COVID-19 ‘like a hurricane coming’ - Price increases forecast from factory closures, shipping slowdown
Published:Tuesday | March 3, 2020 | 12:12 AMDanae Hyman/Staff Reporter
Jamaicans are being advised to brace for a spike in prices because of the shutdown of factories in China last month amid the outbreak of the novel coronavirus, or COVID-19, that has claimed the lives of more than 3,000 people globally.
Business magnate Gassan Azan, CEO of the MegaMart supermarket chain and Bashco department stores, said that a slowdown in production would inevitably send economic shock waves across the world because of the lockdown regime imposed in Chinese cities in January and with many factories located in high-risk quarantine zones. Azan’s businesses are direct or indirect importers from the Asian nation, which has been the epicentre of a disease that is on the brink of being declared a global pandemic.
“China has not come back fully to work since Chinese New Year. You are going to have a big fallout in pricing, because what are going to find is when they gear back up, all the prices are going to have to be borne by somebody, so somewhere along the line, the consumer is going to end up paying for all of this,” Azan told The Gleaner yesterday.
“More than likely, cost of living will also go up because most of the world’s products are made in China, and if the products are made in China, the raw materials are made in China. So, for example, the raw materials that make an Apple phone are actually made in China,” he added.
The gaming lounge operator and restaurateur disclosed that his companies have incurred additional expenses as he hunts alternative sources in other production centres in North and South America.
Many factories in the Americas have also been hamstrung because raw materials are imported from China as shipping channels begin to dry up, Azan said.
Shipping slowdown
His fears corroborate the warning telegraphed by one of the operators of Kingston’s seaport terminals that while Jamaica has no direct service from coming into the wharves from China, the COVID-19 was having a significant impact on the global shipping industry.
Simone Murdock, marketing manager of Kingston Wharves, said that the sector was bracing for a worldwide downturn resulting from restrictions in the movement of goods and people, which will extend to the Port of Kingston.
There are almost 90,000 cases of COVID-19 in nearly 70 nations. Almost 9,000 cases exist outside China, with the majority of those concentrated in four countries – Iran, South Korea, Italy, and Japan.
Meanwhile, CEO of Seprod Limited and president of the Jamaica Manufacturers and Exporters Association (JMEA), Richard Pandohie, shared sentiments similar to Azan’s that Jamaica would suffer from the halt of production in China.
“What’s happening now is that even for companies that have chain supplies to North America and Europe, those suppliers are now being impacted because they also receive raw materials from China. The whole value chain is being impacted, and we are also seeing increased tightening of supplies and, as a result, increased prices,” he said.
Pandohie added that some companies in Jamaica were already feeling the impact of the virus, warning that the consequences could be dire as COVID-19 deepened its reach throughout Europe and the United States.
“We have asked companies to start increasing their stock level and start sensitising staff. At this point in time, the impact is not much, but clearly it is like a hurricane coming, and we see it coming and we are trying to prepare as best as possible,” he said.
Pandohie, however, noted that businesses that import finished goods would be at greater risk of price increases compared to manufacturers who were more insulated because they would play off variations in the unit cost of raw materials.
“The coronavirus has had another impact because like oil prices have gone down big time. So although you have increase in cost in some element, you are supposed to have reduced cost like for energy. We are supposed to see the gas prices coming down based on the world oil prices, and some commodity prices are coming down because the demand in China is just not there,” Pandohie said.