Summary:
- Bangladeshi exports fall as coronavirus-related lockdown dented global trade
- Long periods of lockdown severely affected a wide range of sectors
- Bangladesh economic growth is projected to grow only 2-3%
- Pricing outlook hinges on oil prices, pandemic crisis
On December 31, 2019, Chinese authorities reported several cases of unusual flu-like disease in among a group of people who all had ties to the Huanan Seafood Wholesale market in Wuhan, China, which was shut down the next day. In the following month, the government identified a new type of Coronavirus, which has been provisionally named 2019-nCov, as the cause of the outbreak. Within roughly three months of its emergence, the World Health Organization (WHO) has declared a pandemic over the deadly virus which causes an illness known as COVID-19 that has spread to nearly every country in the world, claiming more than a hundred thousands lives in its relentless march across the globe.
On March 8, Bangladesh announced its first three cases of Coronavirus in the South Asian country. In response, the country took preventive measures against Coronavirus risks, including strengthened surveillance at airports, borders, and issuing travel advisories. In their early efforts to contain the virus, more than 400,000 people have reportedly been screened at airports and other border entry points. As the number of infections continues to rise sharply, the government made a decision to impose a nationwide lockdown from March 26 in a bid to curb the spread of Coronavirus, halting all modes of public transportation and temporarily shutting down non-essential services and educational institutions. The nationwide lockdown, was which was set to expire on April 4, has been extended until May 30 as the country has utterly failed in tackling the Coronavirus crisis. On May 31, the government lifted its lockdown on a limited scale to resume the country's economic activities, after two months of restrictions. However, as those containment measures have been gradually lifted, the pandemic began to escalate with the new casualty records. Amid a spike of new coronavirus cases, the authorities in Bangladesh decided to impose color-coded zone-based lockdown across the country and extended the restrictions on movement until June 30. The decision comes about a week after the country withdrew the nationwide lockdown restrictions at the end of May, in a move to quell the spread of the lethal virus alongside taking effective measures to run the wheels of the economy. As per criteria, around 45 areas in the capital, the entire Gazipur district, 11 areas in the port city of Chattogram, and few areas of Narayanganj and Narsingdi were labelled as red zones. According to the Directorate General of Health Services (DGHS), Bangladesh’s tally of coronavirus infections has crossed the 100,000-mark as there have been 175,494 cases reported in the country and 2,238 deaths so far. As of July 6, the Dhaka city has the highest number of infections, followed by Munshigonj.
Since the Coronavirus outbreak began in China at the end of 2019, its impact has been felt across the global economy. According to the World Bank outlook database, Bangladesh’s economy is projected to grow only 2-3% this fiscal year amid Coronavirus outbreak. Before the pandemic, the country’s economic growth was projected to be strong at above 7%. Bangladesh has been a major beneficiary of globalization since exports of remittances, ready-made garments (RMG), and the domestic agricultural sector has injected essential income to its economy. The outbreak of the deadly coronavirus epidemic in China has sent shockwaves on the major manufacturing and export sectors in Bangladesh, with China as the biggest source of imports raw materials needed for its industries and is also emerging as an export destination for the country. Due to pandemic worries, most international brands have held up billions of dollars worth of orders, leading to a larger decline in demand for end-products.
In the first quarter of 2020, a month-long oil price price war between Saudi Arabia and Russia and Coronavirus fears have taken a toll on Bangladesh polymers market, continuing to exert downward pressure on prices. In an effort to lift the market from a pandemic-driven collapse, both countries ended a devastating oil price war on April 9, agreeing to slash output with other members of OPEC+ alliance by 10 million barrels per day, or about 10% from normal production levels. However, as crude oil prices remain stuck at record lows, most buyers anticipate greater falls in prices and refrained from replenishing inventories. Some foreign suppliers adopted a wait-and-see stance before releasing fresh offers, while most have been unable to take delivery of raw materials due to logistical hurdles, with the disruptions knocking on along supply chains worldwide. Most buyers cited that the company was unable to apply for the relevant customs import permits amid worsening outbreak. Amid ongoing lockdown, most local and national banks in Bangladesh were not fully operational, even some already closed branches temporarily. Due to this circumstance, buyers were unable to complete any transactions as banks were unable to issue the Letter of Credit (LC). Bangladesh polymers industry continued to face strong headwinds in the second quarter of 2020, with coronavirus still dominating as a key factor in the market as concern over resurgence of coronavirus infections is underway sending jitters on the market. Considering the pessimistic market conditions and an unprecedented drop in demand, the majority of buyers in Bangladesh were placing bids for import materials at a few hundred lower than the initial offer level, SSESSMENTS.COM was informed.
Many factories in Bangladesh locked their gates and announced furlough or layoffs at their units amid the coronavirus pandemic and decreased sales during the nationwide shutdown. According to estimates from the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), the pandemic has led factories to lay off more than half of the country's nearly 4.1 million garment workers, with most workers were sent home without their basic payment and house rent. Most small businesses have shut down temporarily, while some companies producing personal protective equipment (PPE) were allowed to resume operations with minimal workforce. However, on Sunday, April 26, hundreds of Bangladesh's garment factories had resumed operations in the industrial areas of Gazipur and Ashulia as retailers pushed most factories to fulfill outstanding export orders, defying nationwide lockdown regulations. For the most of the quarter, downstream factories were still struggling to keep their operating rate at normal levels amid a massive manpower shortages, coupled with weak end-users demand for finished products. Some manufacturers were reportedly running at a reduced rate of 50% from the normal output.
In a bid to help export-oriented industries to cope with the fallout of the pandemic, the Bangladeshi government announced details of its Tk 50 billion ($595 million) bailout or stimulus package in the end of March, including funding of 2 year loans to factory owners at 2% interest and assistance towards salaries. On April 5, Prime Minister Sheikh Hasina unveiled another stimulus packages of Tk 67,750 crore ($8 billion) planned to implement in immediate, short and long phases. This includes, formulating a stimulus package, increasing public expenditure, widening social safety net coverage and increasing monetary supply. So far, the government has announced 19 stimulus packages worth of Tk 103,117 crore ($12.28 billion) which is equivalent to 3.7% of Bangladesh’s gross domestic product.
Entering the third quarter of 2020, most market participants in Bangladesh voiced out to SSESSMENTS.COM that the polymers prices and market movements would largely take cues from crude oil price movements amid lingering coronavirus pandemic concerns.
