The coronavirus' full impact won't hit Long Island businesses until the spring, when inventories are depleted and supply chains from China likely will remain frozen, a trade expert said Monday.
"Companies are surviving on inventory," said Thomas A. Cook, managing director of Blue Tiger International, an East Moriches logistics consultancy. "They're going to run out of supplies probably in April or May. That's the issue."
The warning came as the Dow Jones industrial average tumbled more than 1,000 points Monday, one of its steepest declines on a points basis in history. The S&P 500 and the Nasdaq Composite indexes also fell about 3%.
Cook said about 40 companies — a third of them based on Long Island — have sought Blue Tiger's guidance on the issue.
While he would not disclose clients' names, he said the Long Island companies include producers of chemicals, cosmetics, pharmaceuticals, medical devices and industrial goods.
"Think about how huge China is," Cook said. "They produce almost everything that's made. They're able to produce huge quantities at a low cost."
Even when China is not manufacturing the primary product, he said, it may be the source of a vital component — anything from labels to packaging to food preservatives — required to deliver the final product.
He said that while some factories closed by the coronavirus concerns have reopened, "their inventory is not able to move" because of shipping restrictions.
Cook said he's advising Long island companies to conserve and manage their existing inventories and find alternative sources of supplies.
He said that many companies were being fed misinformation. For instance, one client, a jewelry company, was assured for 60 days that a component was coming and then was told that the Chinese manufacturer could not arrange shipping.
"You'll find more and more companies in that same scenario," Cook said. "It's not an issue now. We're still riding on the inventory companies have, usually 90 to 100 days. I don't think the seriousness of this problem has really hit the business community."
Sino-Global Shipping America Ltd., a Roslyn shipping and freight logistics company whose primary business is a China subsidiary, said last week in its financial report for the quarter ended Dec. 31 that the coronavirus "posed disruption and restrictions on our operations."
The company, which reported revenue of $2 million for the quarter versus $10.4 million in the 2018 period, said the health crisis could "significantly impact our operating results."
Long Island retailers also could feel the bite as tourism slows.
Locally, the top destinations for Chinese tourists are the Americana Manhassett shopping center, Roosevelt Field mall and the Tanger Outlets centers in Deer Park and Riverhead, according to the region’s tourism promoter, Discover Long Island.
While stocks were pummeled, investors charged into the safety of the bond market, driving yields down. That created an opportunity for homebuyers or homeowners seeking to lower their monthly payments.
"The drop in bond yields, to new lows, is bringing mortgage rates down, too," said Greg McBride, chief financial analyst for Bankrate.com. "This blows the refinancing door wide open," he said in a statement.
Savio S. Chan, chief executive of U.S.-China Partners Inc., a trade consulting firm with an office in Great Neck, said his clients would ride out the storm and wait until the virus subsides.
But Cook said even before the coronavirus crisis, some companies that he advises had been trying to move production out of China to skirt tariffs imposed by Washington. The coronavirus, however, has added a new urgency.
"The same companies are asking us to move this along faster," he said. "We've brought several companies back to the United States. Mexico is probably the number one alternative. People now are so upset, they want to get out of China and find other places."