Impact of coronavirus dampens global markets, but could be a boon for chemical demand

Impact of coronavirus dampens global markets, but could be a boon for chemical demand
Published: 6 February 2020 - 3:30 a.m.
By: Martin Menachery
The spread of the coronavirus in China continues to hamper global markets.

The Lunar New Year usually impedes transactions as festivities are prioritised over business, but this year the usual holiday season has been extended to try and contain the virus.

The number of people carrying the coronavirus disease reached almost 28,256 cases – more than 250 as yet non-fatal cases outside of China – with 565 deaths at the time of writing.

This has led to the effective quarantine of the city of Wuhan, the site of the outbreak, and a government-imposed ban on business returning to work in Shanghai until 10 February.

According to Independent Commodity Intelligence Services (ICIS), the uncertainty of the coronavirus has “forced the US-China trade war to take a backseat in terms of priorities for the global economy.”

Markets have already started reacting, with the Indian stock exchanges closing 1% lower on Monday on fears of the virus spreading.

Such fears have been mirrored on the UK's FTSE, with stocks crashing more than 2% since markets opened on Monday.

The impact of this has sent crude levels on a downward trajectory on the back of concerns that demand will be sent spiralling,” said the ICIS report.

Meanwhile, as demand for hygiene products increases amid the coronavirus outbreak, this could stimulate demand for chemical markets.

Products like surgical facemasks, hand sanitisers and rubber gloves could increase as efforts to limit the spread of infection continues, said ICIS.

A rise in demand for facemasks would lend support to acetic acid – as derivative material cellulose acetate is used in production – or, for nonwoven polymers, or paper and the compounders and formulators using involved in the alternative manufacturing process,” the intelligence service said.

ICIS also said that rubber and vinyl-based products may also see demand supported by increased sales of disposable gloves.

“Soaps and hand sanitisers could boost ethanol sales as it is commonly used as the active ingredient in these products, while thickening agents for these solutions and surfactants are also likely to record higher demand,” the intelligence service added.

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