Depth Interpretation Of The Impact Of The Epidemic On The Chemical Industry?

At present, the confirmed cases of new pneumonia are still rising. At 2:30 in the morning of January 31st, the WHO announced that the new coronavirus epidemic situation should be listed as a public health emergencies of international concern.

But WHO also stressed that there is no need to take measures to restrict international travel and trade. Who does not recommend measures to restrict travel and trade.

What kind of impact did the epidemic have on China's economy?

On the one hand, the offline service industry is the first to be seriously affected, especially the cinema line, tourism, accommodation catering, offline education and so on. On the other hand, the outbreak of this outbreak is special, and it also has a significant impact on industrial production activities.

To this end, the author has conducted research on clothing, steel, machinery, petrochemical and other industries, involving Guangdong, Hubei, Zhejiang, Shanghai, Hebei and other places. The situation in different industries and regions is different, but on the whole, industrial production has been affected to varying degrees in terms of employment, order, inventory, production and transportation. The service industry is mainly affected by the impact of demand. Industrial production is also affected by the two aspects of supply and demand, and the situation is more difficult. Under the impact of the epidemic, the contradiction between supply and demand of industrial production activities is very prominent.

Short term difficulties facing industrial recovery

The escalation of the epidemic took place before the Spring Festival, which made employees rework a prominent problem. On the whole, the recovery of industrial production is generally facing the following short-term difficulties:

First, industrial production activities may be postponed passively due to problems such as reemployment time, actual rework of employees, protection standards and material conditions in production.

In order to effectively prevent and control the spread of the epidemic, provinces and cities respectively issued the notice of reemployment time. The demand for resumption is generally not earlier than 24 hours in February 9th. Hubei province requires that all kinds of enterprises should resume their work no earlier than 24 o'clock in February 13th. Therefore, the main industrial activities were postponed for at least 9 days compared with the original Spring Festival holiday. Although the "no sooner than later" arrangement is given everywhere, the actual operation in some areas still depends on the progress of the epidemic prevention and control, and there is some uncertainty.

Because the epidemic is still spreading and the process of prevention and control is in the process, employees' actual rework intention is not strong. From the 29 th day of the fifth and the 30 th, the passenger flow of the national railway was reduced by 74.7% and 73.8% respectively. The rework of the field workers will be postponed and the necessary 2 weeks' isolation time will be added. Therefore, the actual rework time of the workers in the field may be delayed for 2-3 weeks, and some areas may be pushed back longer. In addition, even if the field workers return to their posts, how do they segregate the field workers? Can we provide adequate masks and other protective materials for the resumed employees? What control standards and event handling procedures should be followed in the early stage of enterprise recovery? These are the real problems that the reemployment enterprises are facing. Especially for large employment enterprises, the above problems are more prominent.

Second, the current transportation and logistics channels are facing a blockage.

In order to control the epidemic situation, it is necessary to conduct channel management and temperature detection on expressways, but there are also some ways to block, block roads and even dig roads. A county government also ordered the closure of county, county, and township roads. On the other hand, the transport capacity has also been affected by the impact of the extended holiday (when the transport industry has not resumed).

According to Mysteel statistics, as of January 30th, a total of 22 construction steel enterprises in the southern province totaled 1 million 375 thousand tons, representing an increase of 379 thousand tons compared with the first week after 2019. The main reason is that the logistics is blocked, the goods can not be transported normally, the inventory is rapidly accumulating, and some of the raw materials in the road are also overloaded at the port for unloading.

Third, the delivery order of manufacturing industry will be delayed after a year, and the manufacturing enterprises will be faced with losses.

In February, after the Spring Festival, seasonal clothing and other seasonal products will usher in rush hour and shipping peak. However, due to the foregoing factors, the production recovery process is slow and the delivery time is still difficult to determine, and more orders will be delayed. As a consequence, production enterprises will be faced with withholding money, or forced to rush orders and air transportation to deliver orders as soon as possible, but this will also lead to higher delivery costs. Especially in the export industry, the order delivery delay may face greater losses.

At the same time, before the Spring Festival, manufacturing enterprises have accumulated relatively high hand orders, which will make enterprises face greater pressure on delivery. Between November 2019 and January 2020, PMI's new orders and new export orders index both rose. Due to the limitation of PMI's investigation time, the PMI data in January basically reflected the situation before the epidemic escalation. In January 2020, PMI's new orders index reached 51.4, the highest in 20 months. Meanwhile, the new export orders dropped to 48.7 in January, but they were also significantly higher than the same period in early 2019 and the annual level in 2019. At the same time, from December and January, the new export orders also showed strong performance. It is precisely these hand orders that may cause greater pressure on the delivery, or even bring a certain loss.

　　 The new order index strengthened at the end of last year and early this year.

Source: National Bureau of statistics, January 31, 2020

The impact of the epidemic on industrial production may exceed the 1 quarter.

The impact of the epidemic on production activities is one-time and temporary. But how long is this "temporary"? The author believes that the impact may exceed the 1 quarter, and this possibility needs attention. From the 1 quarter itself, the main impact of the epidemic on economic activities will be reflected in demand shocks in the service sector. The impact on manufacturing is not only reflected in demand shocks, but also in supply shocks.

So why is the economic impact of the epidemic going beyond the 1 quarter?

First, the temporary loss of new orders in export manufacturing industry may affect the epidemic until the 2 quarter.

According to the data from January 2005, the 3 and April after the Spring Festival is the peak season for export orders during the year, and the two are even higher than the third peak Christmas orders in September. In the 3 and 4 months, the average of the order index in March was the highest. It can be seen that the performance of export orders in 3 and April will determine the export performance in the following months.

　　 Every year 3 and April are the peak of new export orders: PMI new export orders.

Data Description: Based on data from January 2005 to January 2020

Source: National Bureau of statistics, January 31, 2020

At present, foreign buyers are highly concerned about the epidemic situation in China. Due to the aforementioned reasons, the order delivery time at the beginning of the year is not yet confirmed, or even a certain proportion will be delayed. If there is still uncertainty in the recovery of industrial capacity in March, it may have a certain impact on the new orders in the month, which will affect the subsequent 2 quarter production activities.

Concerns about the loss of orders vary from one company to another. For enterprises with strong international competitiveness, there is no obvious concern in this regard. But for garment enterprises, foreign buyers may be placing orders in many countries at the same time. If China's production is sluggish, it may affect the direction of foreign buyer's order allocation.

In addition, although WHO does not recommend measures to restrict travel and trade, some countries have adopted restrictive measures separately and improved the risk level. This may also have a negative impact on China's new orders. For example, a foreign supplier should consider adding a new Chinese enterprise as a supplier, which involves preliminary negotiations, product testing, factory inspection, proofing, negotiation and signing. The above links involve international travel from foreign buyers to China. At present, the consultative process of such new Chinese enterprises as suppliers may be disturbed or even suspended, thus affecting the growth of potential export orders.

Second, the fixed expenditure of industrial enterprises remains unchanged and production difficulties increase.

First of all, enterprises are still faced with fixed expenses such as rent, loan interest and so on. Secondly, is it necessary for the enterprise to pay wages during the delay? The standards vary from place to place, and enterprises in some areas still have to pay wages. For example, in January 27th, the notice of Shanghai on the delay of the resumption of enterprises and schools in Shanghai was clearly stated. "For workers who rest, enterprises should pay wages according to the standards stipulated in the labor contract". Thirdly, for new pneumonia patients, suspected patients and close contacts, they can not provide normal labor because of isolation measures such as isolation treatment, isolation observation and so on. Enterprises should also consider "providing normal labor and paying workers' normal working hours' wages".

At the same time, we also note that the capital chain of private industrial enterprises has been generally in a tight state. According to the latest statistics of the National Bureau of statistics, in November 2019, the receivables and accounts receivable of private industrial enterprises amounted to 5 trillion and 25 billion yuan, up 32.3% from the same period last year, which is the highest year-on-year growth rate since 2007. Over the same period, the average payback period of accounts receivable of private industrial enterprises reached 44.6 days, which was eased compared with the peak of 2019, but still at a historical high.

It can be seen that the capital chain of private industrial enterprises is already in a state of tension. Coupled with fixed expenditure unchanged, additional labor costs, delays in reopening work, delays in delivery of orders, and increased cost of protection during the epidemic prevention and control period will have a greater impact on the enterprises in distress. If these enterprises' capital chain breaks, it may lead to bankruptcy and increase in unemployment, which may affect the subsequent economic trend. Attention should be paid to the above situation and full assessment.

　　 Private industrial enterprises capital chain has been more intense.

Source: National Bureau of statistics, WIND data terminal, January 31, 2020

Do a good job in preventing and controlling epidemic diseases and restoring production.

There is no doubt that epidemic prevention and control is still the most important work at present. Under the premise of ensuring the prevention and control of the epidemic situation, we should make arrangements and arrangements for production recovery ahead of schedule, reduce the mid-term impact of the epidemic, and do a good job in linking up the epidemic prevention and control and resuming production. For this reason, the suggestions given by the author are as follows: first, stabilize the capital flow, restore the logistics as soon as possible, then recover the flow of people according to the improvement of the epidemic situation, and resume production activities at the same time.

First, stabilize the flow of capital.

We should provide working capital for enterprises with difficulties in larger industries through targeted tax relief and temporary short-term financing. Especially for private enterprises caught in the plight of the impact of the epidemic, we should help them stabilize the capital chain and tide over the temporary difficulties.

Second, restore logistics as early as possible.

At present, the contradiction between market supply and demand is prominent, and both surplus and shortage exist simultaneously. Against this background, policies should not stimulate the total amount, and should be based on "Dredging" the relationship between supply and demand. And the key link to open up supply and demand is smooth logistics. Therefore, clear standards should be formulated to ensure smooth transportation infrastructure. At the same time, we attach great importance to the key role of the logistics and transportation industry. If we insist on the prevention and control of epidemic standards, the logistics and transportation industry should resume work as soon as possible and resume normal operation. In addition, before the epidemic is fully controlled and the logistics bottleneck is completely opened up, it is not appropriate to implement mass stimulation on a large scale.

Thirdly, to restore the flow of people and production activities.

The government should strengthen communication with enterprises, understand each other and stabilize enterprises' expectation of resuming work. In particular, the government knows more about the difficulties of enterprises, and takes measures according to the situation of different regions and according to the characteristics of different industries.

Because the development of the epidemic is still developing, some areas are unable to determine the specific time to return to work, but some technical standards can be given. According to the number of new cases, the number of floating population and the epidemic prevention situation, a clear and quantifiable reemployment condition is given, which provides a reference for enterprises to resume production. The local government should also clarify the protective measures after resumption of production. If the epidemic situation is not completely relieved, the government should guide enterprises to provide necessary protection for employees and provide adequate supply of protective products for enterprises.