TOKYO -- "We will have to halt shipments in several hours" -- the plant manager was frantic on Tuesday night as the start of India's three-week nationwide lockdown approached.
The directive from Prime Minister Narendra Modi was about to shutter a factory operated by Hitachi Construction Machinery and the Tata group until April 14, along with millions of other businesses.
This would be a huge hit for the Japanese machinery maker that boasts a 35% market share in the country, and the impact is certain to expand as the pandemic starts to depress demand.
As many countries place restrictions or issue lockdown orders to contain the spread of the coronavirus, manufacturers in wide-ranging sectors are being forced to halt production, creating a knockdown effect across supply chains.
Mazda Motor and Toyota Motor have decided to halt production at home and abroad in light of plummeting demand, sending shock waves through Nippon Steel, which supplies steel sheet to top automakers.
"Temporary suspensions of blast furnaces are now on the table," Japan Iron and Steel Federation Chairman Yoshihisa Kitano told reporters Wednesday.
Halting blast furnaces, which usually operate around the clock, is a rare event that last happened in 2009 after a global financial crisis decimated demand.
Until late February, the novel coronavirus was an overseas problem to Japanese steelmakers. Even if automobile production is disrupted in China, the only ones impacted are local companies or joint ventures that supply processed steel and intermediate products, they assumed.
But Southeast Asia and Mexico import much steel directly from Japan. With Japanese automakers set to temporarily halve global output, production adjustment can become a reality for Japanese steelmakers.
Steelmakers are not the only upstream suppliers affected by manufacturing shutdowns. The chemical industry weathered the global financial crisis by eliminating excess capacity and consolidating facilities. As a result, ethylene plants have been running at basically full capacity for years.
But now the slowdown in demand, combined with the crash in petroleum prices, threatens to drag ethylene factory utilization rate under the boom-or-bust line of 90% for the first time in seven years.
Apple is considering delaying the release of new iPhones, an annual event in the fall, by several months. This would have repercussions for upstream suppliers, such as electronic parts makers.
Shrinking production also affects service providers that use end products. The 5G stations used by Japanese telecommunications companies are made in Japan or Europe but rely on parts made in China, which is still reeling from the outbreak.
"We expect a certain impact on our efforts to install 5G base stations after May or June," said Makoto Takahashi, president of telecom carrier KDDI.
Additional reporting by Naoki Watanabe and Annu Nishioka in Tokyo.
