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Pandemic Fears Over Fresh Coronavirus Cases as Supply Chain Risks Rise: The Week Ahead

Just when China was hoping to see an abatement in new confirmed coronavirus infections, a spike in cases in South Korea and Iran now raise concerns that the outbreak could explode into a global pandemic.

Fresh cases in the two nations also speak to the many unknowns surrounding COVID-19, as the novel coronavirus is officially known, including how the deadly virus is transmitted.

New global cases

Much of China is remains in lockdown, and as fashion brands await word on when factory partners can restart operations, news on Thursday indicates that Wednesday’s tally showed 73 new coronavirus cases in South Korea. That number makes Korea home to the “largest outbreak outside of Mainland China to date,” excluding the number of cases connected with the Diamond Princess, the cruise ship under quarantine in Japanese waters, according to Cowen & Co. analyst Kevin Kopelman.

By Thursday, the number of people infected in Korea rose to 125, including the existing 73 cases from Wednesday. Ten new cases were reported in Japan, compounding five in Hong Kong, three in Iran and one in Taiwan. Kopelman’s data checks indicate no new cases in Europe since Feb. 14, and none in the U.S. since Feb. 13.

But what could be of greater concern were the 18 Iran cases across three cities, which the Middle Eastern country has acknowledged. As recently as Tuesday, Iranian officials initially believed the country didn’t have any cases of the virus, but since then at least three have died. What no one understands yet is how the virus made its way from the Chinese city of Wuhan–ground zero for the outbreak–to Iran.

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“The cases that we see in the rest of the world… it’s very worrisome,” Tedros Adhanom Ghebreyesus, the director-general of the World Health Organization, said in a news conference Friday. The “window of opportunity” to contain the virus remains, but is narrowing, he told reporters, cautioning that the outbreak still could go “in any direction.”

The South Korean cases appear to be connected to an infected church member who had been in Wuhan, as those who contracted the virus are congregation members. The increase in cases in China now includes inmates and guards at four prisons in three provinces, but those cases reportedly stemmed from a worker who failed to disclose a recent visit to Wuhan.

China has changed the methodology for diagnosing the virus yet again, compounding the confusion over whether there’s been any progress in its efforts to contain the outbreak.

Supply chain issues

London-based analytics consultancy GlobalData indicates that some factories in China have restarted production after three weeks of shutdowns, though operations remain at reduced capacity. Quarantined workers, travel restrictions and material holdups continue to drive further disruption and ongoing uncertainty.

“China’s role as the leading supplier of yarns, fabrics, trims, packaging and labels also means supply chain delays for garment factories in other countries who are unable to source the textiles and other inputs that they need,” GlobalData said.

“If factories can’t operate, they won’t be able to ship products. And if they’re not getting the raw materials they need, there will be missed deliveries,” Leonie Barrie, GlobalData’s apparel analyst, said.

Barrie believes there could be delays of up to three months on the delivery of summer fashion collections, as well as the potential for delays even later in the year on autumn, back-to-school and holiday merchandise.

And even if fashion firms try to switch up their supply chains, they face new sourcing countries and factories often unable to match China’s volume and the twin challenge of obtaining raw materials that don’t originate from the virus-stricken powerhouse.

Separate from inputs and production, Barrie also raises an equally important risk that companies need to consider: “Also of concern is the prospect of even more severe disruption if factories don’t have the cash flow to survive if they are hit by penalties for delayed delivery of goods,” she said, “or when it becomes a matter of cancelled production rather than delayed production.”