Coronavirus epidemic seen affecting consumer prices

Airport workers in masks against coronavirus  / Photo: Reuters

Israeli manufacturers that use Chinese raw materials are having to source them more expensively in other countries.

The Israel Manufacturers Association estimates that thousands of Israeli companies are liable to be hurt by the coronavirus outbreak. In the past few days, the Association has received enquiries from Israeli industrial companies that have already suffered damage. These are companies that manufacture in Israel using raw materials imported from China or from suppliers in third countries that use Chinese materials in their production processes. The Association has opened a special situation room to assist Israeli manufacturers that have not received consignments or payments because of the spread of the virus. According to the Central Bureau of Statistics, goods imports to Israel from China totaled some $6.7 billion in 2019.

The Manufacturers Association estimates that the coronavirus could affect prices of goods in Israel. Because of the disruption to deliveries from China, and in order not to have to halt production, many companies are approaching suppliers in other countries to ensure continuity of supply. "Imports of these materials from other countries will raise production costs and lead to higher prices," the Manufacturers Association says.

Clothing companies Delta and Adika notified the stock market yesterday of possible effects of the coronavirus epidemic and of the Chinese government's decision to extend the Chinese New Year holiday in a bid to stop the spread of the disease at workplaces.

Delta said that it did not expect substantial harm to its business "among other things because traditionally the return to work after the annual holiday is gradual until full output is regained." Adika said that its activity had not been materially affected so far, but added that "to the extent that the long-term effect of the coronavirus on the company's activity in China does not become clear in the coming weeks, the spread of the virus could have a material adverse effect on the company's business."

Delta's share price fell 14% in the two weeks to yesterday's close. Other companies whose share prices have fallen sharply in this period are industrial companies Ham-Let (Israel-Canada) Ltd. (TASE: HAML), Avgol Nonwoven Industries Ltd. (TASE:AVGL), and Kafrit Industries Ltd. (TASE:KAFR), while El Al Israel Airlines Ltd. (TASE: ELAL) and ISSTA Lines (TASE: ISTA), which are exposed to any downturn in the tourism industry, have fallen 7-8%. The leading indices, the Tel Aviv 35 and the Tel Aviv 125, have fallen 5-6%, while the SME 60 is down about 7%.

Published by Globes, Israel business news - en.globes.co.il - on February 4, 2020

© Copyright of Globes Publisher Itonut (1983) Ltd. 2020

Airport workers in masks against coronavirus  / Photo: Reuters
Airport workers in masks against coronavirus / Photo: Reuters
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