Coronavirus concerns: India Inc in a cold sweat as lockdown in China continues

The coronavirus outbreak is giving industry the jitters, especially sectors heavily dependent on Chinese imports such as consumer electronics, automobiles and pharmaceuticals. Seafood and spices exports are also vulnerable as Beijing absorbs a big chunk of the $10-billion these shipments bring in every year.Industry officials say trade has already been affected and unless Chinese supplies bounce back quickly, it would lead to scarcity and higher prices in a few weeks. Looking for alternatives to China is time-consuming and costly.Prices of active pharmaceutical ingredients (APIs) for antibiotics and anti-inflammatory drugs have skyrocketed, and mobile handsets and consumer electronics could be next.Paracetamol prices have increased from Rs 260-360 per kg. Nimesulide has more than doubled to Rs 1,100 from Rs 450. Azithromycin, used for bacterial infections, and montelukast, for treatment of respiratory infections, have shot up by about 30%. “As of now we are OK,” said Kedar Upadhye, global CFO at Cipla Ltd.73973127 Govt Officials Optimistic“We do store two months stock of APIs and intermediates as part of inventory holding norms. If the plants do not start by end February, then it will become a delicate situation not only for us but for the entire pharma industry,” said Cipla’s Upadhye. With only a few coronavirus cases reported in India and stocks of Chinese components still not exhausted, government officials are optimistic there won’t be any large-scale disruption. “Not at all, not for now,” said economic affairs secretary Atanu Chakraborty, when asked if the outbreak had hit economic activity in India.ElectronicsChina is a big supplier of television panels, LED chips, compressors for refrigerators and air-conditioners, and motors. The prices of these products could increase if the supply disruption is prolonged. “The China scenario is turning into a nightmare, with no commitment from vendors on when materials can move,” said Manmohan Ganesh, COO of online-exclusive electronics company BPL India. He said the company’s buffer inventory is getting exhausted. “It can become a severe shortage for television panels. Some vendors operating from Hong Kong have already raised prices of panels by 5-7%, taking advantage of the situation. If the lockdown continues… the shortage could stretch to a month or so,” said Ganesh.Companies said slowdown of port operations is another threat. “If the shutdown continues beyond the stipulated February 9, there would be disruptions for sure,” said Sunil Vachani, chairman of domestic contract manufacturer Dixon Technologies.Shoe manufacturers are bracing for a hit. Harkirat Singh, managing director of Woodland, which imports 10% of shoes and specialised raw material from China, said it may lose business. “We are trying to shift Chinese production to other locations. However, it takes time. If China continues the shutdown, there could be 5-10% of business loss.”Mobile HandsetsIndia’s handset industry is days away from trouble. Pankaj Mohindroo, chairman of the India Cellular and Electronics Association, said the industry will feel the pain next week unless Chinese factories resume full operations from Monday.Lava chief manufacturing officer Sanjeev Aggarwal said: “The supply chain is certainly getting impacted and we need to think of alternatives already, else it will lead to a major disruption… The situation is precarious.”AutomobilesThe automobile industry could be impacted if the supply of parts is disrupted. “The Chinese are on extended holiday, so we don’t know the extent of disruption. We will have more clarity once they open on February 9,” MG Motor India president Rajeev Chaba said. “We are hand-to-mouth because of pending orders. Our production will get disrupted this month.” The company has 18,000 bookings for SUV Hector and 2,400 orders for ZS EV, launched last month.Some auto companies may struggle before new emission norms become effective. “If the situation does not improve, there is a fear that we may not be able to conclude the sale of BS-IV vehicles before March 31 and that is because of the absence of one part,” said Pawan Goenka, MD of Mahindra & Mahindra. “We may have to request the Supreme Court to extend the deadline in this unforeseen circumstance.”“We won’t be directly impacted by this virus outbreak. But a few of our component makers may have some sourcing from China and they may be impacted. As of now, we are not seeing any impact,” said Kenichi Ayukawa, managing director of Maruti Suzuki, India’s largest carmaker.Diamonds & SeafoodDiamond and seafood exporters foresee a loss of business.“Sales of diamonds pick up during the Chinese New Year,” said Vipul Shah, a diamond exporter. He said sales and enquiries from the region had dropped.Seafood exporters are getting stranded, said Rahul Kulkarni, director of WestCoast Fine Foods. “Demand from China has tanked and processors are stuck with inventory. It’s going to be an issue, with no immediate market access availability. It will have an impact on farm gate prices,” he said. With a slump in its own shrimp production, China had been buying large quantities of Indian seafood in the past two years.SpicesAnother vulnerable segment is spices, especially cumin and chilli, which are sold to China. “If it prolongs for the next two months, exports will be hit as the harvest of several rabi spice crops is in March-April. Chilli harvest has already started,” said Rajiv Palicha, chairman of the All India Spices Exporters’ Forum. The slump in orders may lead to a dip in prices as well, he added. India exported over ?46,500 crore worth of seafood and ?19,500 crore of spices last year.RubberThe rubber industry expects a slowdown as China is the largest consumer of natural rubber. “Demand slump and general travel restrictions may reflect on prices. Everything will depend on how fast China can contain the disease,” said Rajiv Budhraja, director general, Automotive Tyre Manufacturers’ Association.Not everything is negative. The outbreak pulled crude oil prices to the lowest level in more than a year and made cooking oils cheaper as China is a major buyer.TradeBankers say it is too early to assess the impact of the spread of the coronavirus in China on trade with India. “So far, we have not seen anything in the numbers or even anecdotally to suggest there has been an impact. It could be it is too early to judge the impact because trade will be hit badly only if this virus continues to spread,” said a senior executive at a large private sector bank.

from Economic Times https://ift.tt/2UvRLj4