Novel coronavirus pneumonia hits global chemical market

Novel coronavirus pneumonia is rampant. China has been able to suppress the spread and development of the epidemic through various effective ways, including extending the new year's holiday, postponing the resumption of manufacturing industry and temporarily closing some retail businesses. In this regard, the international chemical market said that China's move is conducive to the prevention and control of the epidemic, but will inevitably hit the global demand for chemicals. With the extension of the Lunar New Year holiday, the production and trade of China's petrochemical industry will be affected. Meanwhile, novel coronavirus pneumonia infection continues to rise, and optimism in the international market has been extinguished after the Spring Festival holiday. The impact of the epidemic on the global chemical market may be greater than expected.

Delay the resumption of work and crack down on the trade chain

Novel coronavirus pneumonia has been extended to China since January 30th, to reduce the risk of transmission of new crown pneumonia. However, in the key areas where the chemical industry is densely distributed, the holidays have been further extended. In Shanghai, Jiangsu, Zhejiang, Chongqing and other important manufacturing centers, local governments have extended the holiday for one week to February 9, while in Hubei Province, where the epidemic occurred, the holiday has been extended to February 13. Due to the heavy dependence on migrant workers, the production of Chinese manufacturing factories will inevitably be affected. Many places control the activities of returning workers, which also makes some migrant workers unable to return to their posts immediately.

In addition, affected by various factors, some international end product manufacturers in China have experienced a long period of shutdown, and some factories still fail to start, including some world-famous super factories. The U.S. General Motors plant in China will be shut down until February 14; the Japanese Honda plant in China will be shut down until late February; the production of Tesla's new super plant in Shanghai will also be suspended for a time. The plant started on February 10, but production of some of its key models was delayed.

The factories or sales points of international enterprises in China play an important role in the world trade chain. Therefore, their delayed start-up or even shutdown is bound to seriously affect the upstream and downstream industries, including the chemical industry. Some international traders said China novel coronavirus pneumonia would have a double impact on chemical production in China and even in Asia Pacific from the end of production and demand side. One American trader doing business in Asia said: "in the first quarter of this year, many factories in China may not be in operation for a few weeks. In terms of demand for petrochemical products, the consumption of raw materials such as petroleum, naphtha, ethylene, propylene, styrene monomer and ethylene glycol will decline, and the domestic production will also decline. This will affect the import and export of the Chinese market, and thus the world market. "

The market is under attack in many aspects

China's novel coronavirus pneumonia is more concerned about the impact of the new crown pneumonia epidemic on the market for chemicals. Novel coronavirus pneumonia, a senior consultant in John Richardson, estimates that China's demand for polyethylene (PE) will be greatly reduced by the one-off plastic ban and the new crown pneumonia epidemic, which may reduce about 4 million 100 thousand tons. Jim fittering, the chief executive of Dow Chemical, is relatively optimistic. He believes that novel coronavirus pneumonia will cause a surge in the sanitary products market, just like past infectious diseases. However, it will be calm down within a few weeks and return to normal. It will not change the trend of good market.

Robert Bryant, chief executive of AXD coatings systems, mentioned the impact of logistics. "Novel coronavirus pneumonia has a direct impact on the development of the company," he said. At present, the access roads of some major cities in China have been closed, and the impact on product transportation, shipping and imported raw materials is unclear. In addition, there are also challenges in terms of demand. Many of AXD's light vehicle customers have delayed their production plans for one to three weeks, and many car dealers are expected to close long after the Lunar New Year holiday. "

In addition to coatings, market participants expect that other chemical materials with large terminal demand, such as polypropylene (PP), styrene butadiene rubber (SBR) and polycarbonate (PC), will also be impacted.

To slow down the growth of macro economy

It is worth noting that China is now far more important to the global economy than the SARS epidemic period in 2003. Credit Suisse analysts point out that China's GDP accounted for 4.3% of global GDP in 2003, and now it has soared to 16.3%. "So far, the death rate of coronavirus in Wuhan seems to be much lower than that of SARS or mers, and the response of the Chinese government is much faster than that of SARS," said an analyst at Credit Suisse. Nevertheless, in view of the uniqueness of the epidemic and other factors, it may have a greater impact on China's economy and even the world economy than it did when SARS broke out. "

Credit Suisse estimated that the final New Coronavirus epidemic could temporarily reduce China's economic growth by 1.5 percentage points. Global GDP growth will decrease by at least 0.2 percentage point. But they also expect further fiscal policy in China to offset most of the impact.