Coronavirus’ impact on US industry

We started the year not knowing much – if anything – about coronavirus, a highly contagious and sometimes fatal respiratory illness, but it has shot to the top of everyone’s agenda. Those in the North American industrial gas industry have taken precautions to try and prevent the spread of the virus, as well as preparing for its impact on business and product demand.

Measures designed to halt coronavirus transmission have included quarantining workers, putting whole cities/countries into lockdown, idling factories, and social distancing. This has resulted in a reduction of manufacturing in some countries, and a widespread halt in international travel. China, Japan and Italy were worst hit early in the outbreak, but there were consequences for businesses beyond those nations. Oil prices and stockmarkets plummeted in March and, depending on who you believe, the coronavirus will trigger the biggest financial crisis since the banks crashed in 2008. How will all of this affect your business and supply chain, and how sick will the coronavirus leave global economy?

North American reaction

Early evidence of the virus’ effects on business beyond China, where it started, was the postponing of a series of major trade events, including in North America.

Companies have cut back on non-essential travel, on the advice of officials or government, and this has hit event organisers, hotels and travel companies.

Trade events have been particularly hurt, with a series of postponements in March. 

The Seafood Expo North America/Seafood Processing North America, due to take place in Boston on March 15-17, was postponed. The event was expected to attract 18,000 and exhibitors included the likes of major industrial gas companies Praxair, a Linde company, and Messer, as well as TOMCO2.

f-cell+HFC 2020, a hydrogen fuel cell trade event scheduled to take place in Vancouver on April 1-2, was also postponed and the GAWDA Spring Management Conference (SMC), one of the highlights of the North American industrial gas calendar and due to take place in Austin, Texas, on April 5-7, was cancelled on March 16.

China’s economy has been severely disrupted and a North America-based business relying on parts from China may be impacted by supplies later this year. By March, Covid-19 had reportedly led to fewer shipments of Apple’s iPhones out of China.

Doug Morton, of Ohio-based Eleet Cryogenics, the exclusive North American stocking partner and sales channel for Taylor-Wharton Malaysia’s microbulk tanks, atmospheric bulk tanks, and vacuum jacketed CO₂ tanks, told gasworld in early March, “We have had just a few orders that come to us from China delayed or even held due to this current situation. Fortunately for us, another advantage for Eleet is that the Taylor-Wharton microbulk and bulk tanks that we distribute in the US and Canada come to us from Kuala Lumpur, Malaysia which has not been negatively impacted and shipments are on schedule.”

But other supply chains have been disrupted as people stay away from work, which affected the automobile industry in China, Japan and South Korea in the first quarter (Q1). By March, it was already being reported that US terminal operators at the ports Los Angeles and Long Beach were likely to see a slump in cargo volume. The Wall Street Journal reported that containership operators have cancelled nearly 60 trans-Pacific sailings to the ports of Los Angeles and Long Beach, California, in the first quarter, and are expected to handle 20% less cargo in Q1.

In February, China’s manufacturers reported a widespread contraction in output and the economic ramifications of China’s approach – restricting the movement of about 700 million people at one point – are still playing out. A large number of quarantined workers, and extensive social distancing, could sharply curb consumer spending and hit economies around the world, and some economists say a recession, or at least a severe slowdown, will be hard to avoid. If the virus is contained in the months ahead, then it will only be a temporary disruption, and slowdown.

But Morton is not overly concerned.

“I am hopeful and trust that this too shall pass, as other situations like this have historically, with overall relatively minimal impact,” Morton said.

At the time of going to press, Norris Cylinder Company, which manufactures high-pressure steel and acetylene cylinders from manufacturing locations in Longview, Texas and Huntsville, Alabama, had not seen any effects.

Michael Rollins, Vice-President of Global Sales and Marketing, told gasworld, “We are not travelling internationally until we believe the situation subsides, but continue to travel within the US on an as needed basis. Norris has reviewed our sourcing strategy to determine if any of our suppliers will be impacted by the coronavirus situation. At this point, we believe we have an adequate supply of raw material and components, largely from US-based sub-suppliers.

“Fortunately, this should allow Norris to meet our customers’ near term and longer term cylinder needs. Because of our ‘Buy American’ sourcing strategy, we do not anticipate any Norris disruption to our customers. Regarding the overall channel, made up of numerous equipment suppliers to industrial gas customers, it is difficult to predict what the future impact will be with their respective situations, since many of these companies have various degrees of dependency on supply from those more critically affected regions in the world.”

David Schaer, Computers Unlimited President, explained how the Montana-based company is coping: “We are reminding employees what basic steps to take to minimise the possibility to come into contact with the coronavirus. Keep hand shaking to a minimum; wave or elbow tap. And for those employees travelling for onsite customer training, carry Clorox disinfecting wipes to wipe down your surroundings i.e. plane seat and tray, and use Purell hand sanitiser when necessary.”

Supply, demand

Industry veteran Ken Thompson, believes the situation is not unprecedented and explained how some companies have coped with the outbreak. Thompson told gasworld, “One orderly approach might be to ask the question, ‘What did you do last time?’ And, yes, there have been prior occasions when serious supply chain disruptions have occurred. Think for a moment about the 911 attacks, the natural disaster of a tsunami destroying a Japanese nuclear facility, long-term European Union labour outages, and, in our own industry space, the political blockade of Qatar that curtailed shipment of an enormous percentage of the globe’s badly needed helium supply.

“Recovery from these past experiences came in many forms. Many companies created emergency response teams who wrote new protocol to touch various elements of total supply logistics. They included everything from better and simple management of ‘A & B’ inventory item depths to locating alternative supply sources, to taking charge of logistics options. I do have a couple of close arrangements with companies specifically connected to Far East source points. Frankly, most of those are already past the crisis. They ‘bulked’ up inventory very early – had goods on the ocean – and currently have circumvented the roadblocks in the supply chain and have normal flows re-established – some from China.”

After China, other nations closed their borders; cities like New York and Los Angeles closed bars and restaurants; some schools and workplaces have closed, and people have closed their doors as the world tries to stop the spread. By mid-March, The Centers for Disease Control and Prevention recommended a ban on gatherings of more than 50 people for the next eight weeks. By then, Google’s parent company Alphabet had already asked its North American staff – almost 100,000 – to work from home.

But working from home is not possible for all. A rise in the number of patients admitted with coronavirus will lead to an increased demand for medical oxygen at hospitals, and someone needs to deliver it. Major gas companies and distributors will have to adjust their production plans according to the development of the epidemic, focusing on the production of medical oxygen and ensuring adequate transport capacity. Health services and supply chains will need to maintain a business as usual approach, while taking precautions to reduce the risk of further transmission, and to keep operating rather than adopting shutdowns. Gas companies and distributors will also assess how long deliveries can be sustained to meet demand amid the possibility of absenteeism.

Then there are the consequences of sport closing down, after the NBA season was suspended in March, as well as bars and restaurants. Officials closed bars in New York City, Boston and California, as well as other places, for St. Patrick’s Day, one of the busiest days of the year. Other entertainment and sports events have been postponed across the world, or will take place at empty venues for a sustained period. If widespread social distancing continues, this will affect things like CO₂ demand at bars and restaurants, malls, movie theatres and sports venues while a dip in manufacturing will impact on the demand for welding gases.

In the first week of March, Messer Americas had been unaffected by coronavirus. In a statement to gasworld, the major said, “To date, none of Messer’s operations have been adversely impacted by Covid-19, so our ability to supply gases and products to our customers in the Americas remains unchanged as a result of the outbreak. Messer leadership continues to closely monitor the status of the outbreak, and we are taking proactive measures to help prevent the spread of the virus, protect the health and safety of our employees, and ensure business resiliency and supply continuity in the event of heightened spread of the virus in this region.”

Take action

Marilyn Dempsey, of Safety Dragons Workplace Consultants and GAWDA Safety Consultant, offered some advice on what to do to prepare. She told gasworld, “Since this is a new and highly contagious virus, we can expect some of our workforce will become infected, creating production and distribution delays due to absenteeism/facility cleaning and decreasing our overall productivity. We have a great workforce within the industry and we need to train them on how to protect themselves, their families, maintain a clean workplace and the company’s contingency plan during this pandemic. We must communicate our concern for our customers and explain how and why we may need to prioritise our product delivery. It would also benefit both the customer and the company to have a clear understanding that the cleaning and decontamination of cylinders and related equipment is the customer’s responsibility.

“Medical customers are required to establish biohazardous material cleaning programs, which includes decontamination of equipment surfaces and disposal of contaminated cleaning materials. Communication with local emergency management teams is important to understand the spread of Covid-19 in your area and keep your plan current. As good stewards of the community we may be called to assist with planning and as a source of emergency medical gases.”

Advice from the Compressed Gas Association’s can be found here https://www.gasworld.com/cga-advice-on-coronavirus/2018606.article.

The full article will appear in the April issue of gasworld US.