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| Newly developed vehicles wait to be shipped at the Hyundai Ulsan plant on March 15. Local car makers have been directly affected by the global pandemic among other major industries. Yonhap |
Auto, oil, ship industries bracing for steep downturn
By Kim Hyun-bin
The COVID-19 pandemic has taken a major toll on key local manufacturers forcing them to close overseas factories as it also drastically slashed consumption.
The biggest fear is the uncertainty of the global economic downturn triggered by the coronavirus, as it is difficult to predict how long the pandemic will last. Many businesses are bracing for a bigger fallout as the situation is expected to get worse in the following months.
Hyundai and Kia Motors have been directly affected by the virus. Last month, the companies lacked Chinese car components after the subcontracting factories came to a halt, which lead to a halt in domestic production. Their situation became worse still this month after production plants in the U.S., Europe and India were forced to shut down due to the pandemic.
Sales in China plummeted 95 percent in February compared to the same month last year, while the global spread of the virus is expected to slash consumption in the months to come.
"Shares have plummeted this month, and chain shutdowns of global factories have taken a toll on the industry. There are worries the situation could get even worse in April and May," an official at a major car manufacturer said.
The country's leading automaker decided to halt operations of its plants in the U.S., Europe, India, Brazil, Russia and Turkey, Friday, and currently is only operating factories in China, Mexico and Korea.
Its sister company Kia Motors halted work at its plants in Georgia, U.S. through April 10 and its plant in Slovakia will be closed through April 3, while the one in India is shut down due to the lockdown there.
Moody's Investors Services expected sales to fall around 14 percent this year and a 30 percent reduction is expected in the second quarter for the global car industry.
It also pointed out that demand for new releases will also decline and this is expected to continue through early summer.
The shipbuilding industry is also bracing for the situation to get worse in the coming months, as there has been a postponement of orders.
Hyundai Heavy Industries received shipbuilding contracts worth $600 million in January to February, down 33.3 percent from the same period last year, while Daewoo Shipbuilding & Marine Engineering and Samsung Heavy Industry saw 73.6 percent and 72.7 percent declines in orders, respectively.
"We do not know when the virus situation will ease. It is difficult even to establish a detailed management plan," an industry official said.
The steel industry has been suffering from a lack of overseas production.
POSCO, the world's fifth-biggest steelmaker by output, shuttered its coil service center in Italy last week, which will remain closed through April 3, and closed four plants in India and Southeast Asia through the end of the month.
The rapid spread of COVID-19, a deteriorating economic outlook, falling oil prices and asset price declines are "creating a severe and extensive credit shock," Moody's said in its statement. "The combined credit effects of these developments are unprecedented."
