The outbreak of the new coronavirus during the Spring Festival has surely had an impact on the Chinese economy. While efforts are being made across the country to fight the epidemic, the delay of the resumption of production, the blocked logistics and the stagnated consumption brought about by the epidemic prevention and control measures have had an impact on the production and operation of the chemical enterprises.

The sub industry sectors in which Hubei has a higher proportion of capacity, such as the phosphorus chemical industry, pesticide production and vitamin production may fall out of balance in the short term.

With reference to the imbalance in the supply and demand in the chemical industry during SARS in 2003, it may be noted that the production output quickly returned to normal after the epidemic.

At present, the epicenter is still in Hubei Province, where the production of chemical enterprises is greatly affected. In terms of capacity, the revenue of Hubei’s chemical industry accounts for some 3.5% of the total in the country, ranking fifth in the country, whilst the number of chemical enterprises accounts for 3.87% of the total in the country, also ranking fifth. On the whole, the capacity of the chemical industry in the province is not too big; thus, the impact is relatively controllable. From the perspective of the sub industry sector, Hubei’s production capacity accounts for a relatively high proportion in the whole country, including the phosphorus chemical industry, pesticide production and vitamin production.

Sub industry sector in which Hubei has a higher proportion

Phosphorus chemical industry

This is already an industry sector with excess capacity, for which demand is mostly concentrated during the spring and summer, so this industry may not be out of balance in the short term. However, due to the delay in Hubei’s resumption of production and the effect of traffic controls, the production and supply of raw materials are affected. As a whole, the impact is limited to the short term, but if the epidemic lasts long, the production will be affected for a longer time.

Pesticide production

During the Spring Festival, the production of the pesticide technical in northern China mostly continued. Pesticide production in the Hubei Province is expected to decline due to the epidemic situation. As the demand for pesticides is relatively rigid, the demand is expected to double at the end of the epidemic. However, as the outbreak is announced as a Public Health Emergency of International Concern, overseas buyers would want to wait and see, thus affecting the demand from the overseas market. The water and land transportation in Hubei are also both restricted, which hinders the supply of raw materials and the sales of finished products.

In general, as the epidemic develops, the delay in the resumption of production in Hubei Province will affect the start of production. The blocked transportation will affect the supply of raw materials and the transportation of finished products. The capacity of some industry sectors will be affected, and the supply and demand of these products may fall out of balance in certain stages.

 

Source: Agropages