Deadly coronavirus in China could have repercussions for the cannabis industry

Bethan Rose Jenkins, Cannabis News Writer/Editorial

A respiratory illness called “Coronavirus (COVID-19)” has proliferated throughout China’s Hubei province of Wuhan; spreading across 25 countries and infecting 37,558 people as of February 9, 2020. The deadly virus which is associated with symptoms like mild cough, fever and shortness of breath – not only poses a threat to people’s health but also, the growth of the global cannabis market.

Cannabis companies that rely on Chinese suppliers are panicking, what with various global entry ports to China being temporarily closed to minimize further outbreaks. Supply issue constraints have lingered since Trump imposed tariffs on Chinese products back in April 2018. Now, the Coronavirus looks set to cause some serious damage to the country’s economy and the cannabis industry at large.

By the end of 2019, analysts confirmed that cannabis stocks had suffered more than any other year; many of which had depreciated by almost half of their value. To make matters worse, the Coronavirus’ impact on cannabis industry growth could result in 2020 being the worst year on record for pot stocks.

Coronavirus’ impact on cannabis industry: Businesses closures and quarantine 

China is the second-largest economy by gross domestic product (GDP) on the planet. With that being said, many suppliers in the global legal cannabis space are dependent on the Asian country to provide them with stock and supplies; e.g. packaging supplies, LED lighting, extraction equipment, greenhouse/cultivation facilities and vape cartridges.

Based on a recent report by the World Health Organization (WHO), 812 people in China have lost their lives due to the Coronavirus. An additional 6,188 cases have been described as “severe.” On a global scale, coronavirus cases have topped 69,000. In an attempt to curb the rate of infection, large groups of people have been quarantined.

Unfortunately, due to the Coronavirus outbreak, many cannabis companies that source their goods from China are unable to generate adequate revenue; leading to short-term and permanent business closures. Even those that haven’t been forced to shut-up shop are likely to feel the pinch. A steady supply of inventory will be hard to come by, considering the fact that China is a go-to source for tech hardware used to create vaporizer devices. As a direct effect of this, ancillary cannabis stocks are expected to suffer.

Coronavirus’ impact on cannabis industry: Employees unable to travel or are stuck between entry ports

The closure of numerous entry ports has put a spanner in the works for those who frequently venture to China’s hardware development hotspots, such as the Shenzhen region. While the employees of some cannabis companies have been left stranded outside of China, others are finding it difficult to get back into the United States.

It’s likely that planning predicaments will fester among cannabis companies that depend on a Chinese supply chain; products that fly off the shelf quickly will be difficult to restock for the same price that China offers. On the plus side, following the vape-lung crisis that erupted in August 2019, a great deal of retailers have been drowning in a surplus of vape-related stock and will therefore have something to fall back on.

You can find out more about the coronavirus disease by visiting the Centers for Disease Control and Prevention (CDC) website.