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Philippine metal makers may take a hit from China factory shutdowns due to Covid-19

MANILA (Philippine Daily Inquirer/ANN): Among domestic industries, manufacturers of fabricated metals would be most badly hit by supply chain disruptions being caused by a shutdown among Chinese factories due to the Covid-19 outbreak, London-based Capital Economics said.

“Factory shutdowns in China are starting to have significant knock-on effects on the rest of the region as companies struggle to source intermediate goods.

“The garment and electronics sectors are likely to experience the worst of the disruption, while Vietnam and Malaysia are set to be the hardest-hit countries, ” Capital Economics senior Asia economist Gareth Leather said in a Feb 13 report titled “How big will the disruption be to Asian supply chains?”

“Following extended shutdowns over the Chinese New Year, factories across China were due to reopen this week. But with some companies being ordered to remain shut for at least another week and factories reportedly struggling to find enough workers, the disruption to China’s industrial sector is likely to drag on, ” Capital Economics added.

“The worsening prospects for Asian industry is one of the reasons we think the economic impact from the spread of the coronavirus will exceed that from SARS in 2003.

“During SARS most factories and offices in China and the rest of the region remained open, and the impact on industrial production and exports was relatively small, ” Capital Economics noted.

A Capital Economics heat map showed that in the Philippines, 47 per cent of the total imported manufacturing inputs being used by local fabricated metal manufacturers came from China.

In the textiles and apparel sector, China-sourced inputs accounted for 38 per cent of total; in wood and cork, 36 per cent; other non-metals, 36 per cent; basic metals, 33 per cent; other machinery, 33 per cent; other manufacturing, 31 per cent; and other transport, 30 per cent.

In the case of electrical machinery, the share of inputs imported from China was 29 per cent; paper and printing, 25 per cent; rubber and plastic, 22 per cent; chemicals, 19 per cent; autos and parts, 18 per cent; electronic devices, 18 per cent; food, drinks and tobacco, 14 per cent; and coke and petroleum, 4 per cent.

In 2019, China was the Philippines’ top source of imports and third-largest export market.

The value of goods imported from China last year reached US$24.5 billion, up 11.5 per cent from 2018 and cornered 22.9 per cent of last year’s total imports, the latest government data showed.

Philippine-made products exported to China in 2019 amounted US$9.6 billion, up 9.2 per cent and accounted for 13.7 per cent of total. – Philippine Daily Inquirer/Asia News Network

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