Floods may disrupt supply chain of goods

Reuters
Zhengzhou is the junction for the major north-south and east-west high-speed rail lines, with connections to most major Chinese cities from one of Asia's largest stations.
Reuters

The floods drenching central China and submerging swathes of a major economic and transport hub are threatening supply chains for goods ranging from cars and electronics to pigs, peanuts and coal.

Power had been partly restored and some trains and flights were running on Thursday but analysts said disruption could last for several days, pushing up prices and slowing business across densely populated Henan and neighboring provinces.

Henan's capital city Zhengzhou is the junction for the major north-south and east-west high-speed rail lines, with connections to most major Chinese cities from one of Asia's largest stations.

Transport of coal from top mining regions like Inner Mongolia and Shanxi via Zhengzhou to central and eastern China was "severely impacted," the state planner said on Wednesday, just as power plants scramble for fuel to meet peak summer demand.

"As Zhengzhou is a top national transportation hub and Henan Province is a major producer of grains, raw materials and some manufactured products like iPhones, we believe the rainfall and flooding will have a material impact on business activity and inflation in the short term," Nomura analysts wrote.

Foxconn, which makes iPhones for Apple at a plant in Zhengzhou, said there has been no direct impact on its main facility.

"We are closely monitoring the situation and will provide any updates as appropriate," it said.

However, a person familiar with the matter said production at a Foxconn facility that makes desktop connectors in the Zhongmu section of Zhengzhou was affected after some equipment was damaged in the flooding.

China's largest automaker, SAIC Motor, warned of short-term impact on logistics at its Zhengzhou plant, while Japan's Nissan said production at its factory had been suspended.

The rain snarled transport of pigs to slaughterhouses in one of the country's top pork-producing regions, said a hog trader, and Nomura said food prices in Henan, home to almost 100 million people, and neighboring provinces could edge up in coming weeks.

The floods could also have a longer-term impact on farm output as rainwater can spread disease on farms.

Special Reports

Top