Little known water company

From the Australian April 18

THE GREAT UNRAVELLING

On January 24, a listed but little-known water decontamination company with a bunch of contracts in China published a salutary warning about the coronavirus.

By RICHARD GLUYAS

• FromEconomics
  April 18, 2020
• 15 MINUTEREAD
  10

On January 24, almost a month before the benchmark S&P/ASX 200 index cruised to its record high, a listed but little-known water decontamination company with a bunch of contracts in China published a salutary warning about the coronavirus.

Phoslock Environmental Technologies, chaired and partly-owned byfunds management pioneer Laurence Freedman, reassured investors that there had been no impact on the business from the “current health concerns” in China, and staff had completed the first applications of its CSIRO blue-green-algae-busting technology in Wuhan last September and October.

“None of our staff has been affected and there has been no impact on PET’s business,” Phoslock said, in the first virus-related announcement by an ASX-listed company.

The mere mention of an Australian business connection to Wuhan, which is recognised as ground zero for the global spread of the rebadged COVID-19 virus, might have been expected to attract a glimmer of wider interest.

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The silence, however, was deafening.

Freedman is understandably circumspect about the source for his COVID-19 call, which turned out to be remarkably prescient.

“We closed our factory (in central-western China) before most people did,” he tells The Weekend Australian.

“The messages we were getting from local authorities were very alarming, and we felt it was necessary to take all necessary precautions.

“The government locked down the Wuhan area shortly after (on January 23).”

Within a matter of weeks, therogue virus led to a chaotic run of lockdownsaround the world, with income per capita now expected to shrink in more than 170 countries, according to this week’sWorld Economic Outlookfrom the International Monetary Fund.

The IMF forecast on Tuesday that $US9 trillion ($14.1 trillion) would be stripped from global GDP over this year and next: more than the combined economies of Germany and Japan.

The forecast 3 per cent contraction in 2020 global GDP — 30 times larger than the 0.1 per cent reduction due to the financial crisis — would be the worst year since the Great Depression, with the Australian economy to shrink by an extraordinary 6.7 per cent this year before staging a recovery in 2021.

As the Russian revolutionary leader Vladimir Ilyich Lenin once put it: “There are decades when nothing happens, and there are weeks when decades happen.”

Former Australian Securities Exchange chief executive Elmer Funke Kupper says the collapse in the economy validates the IMF’s comparisons with the Great Depression, but only to a point because the gaping wound is entirely self-inflicted.

It’s a unique situation, he says, and to the extent the crisis is self-made it can also be resolved by “opening the place up”.

“The Great Depression was a decade of misery but this will be nothing like it,” Funke Kupper says.

“Having said that, there are some factors that will make this an uneven recovery.”

As it turned out, COVID-19 claimed no lives at the Phoslock factory in China.

Full production was restored four weeks ago, about two weeks after staff had returned to work.

Freedman says China is back to work “in a very serious manner”, although there were widespread concerns that the virus could produce a second wave.

“But one of the advantages the country has in this kind of environment is that its technology is extremely advanced in facial recognition and keeping tabs on everyone,” he says.

Clearly, liberal democracies would baulk at the scale of China’s intrusions.

On February 1, at the end of the week following Phoslock’s ASX update, Australia reported only a dozen coronavirus cases, all of whom had a Wuhan travel history.

Only one was admitted to intensive care.

While the Department of Health said the exact nature of transmission was “poorly understood”, it seemed there was no cause for immediate alarm.

The ASX 200 closed effortlesslyat a record high of 7162.5 pointson February 20.

It was the calm before the storm: a once-in-a-lifetime event so vicious and so abrupt that it will fundamentally change how business is conducted for the foreseeable future.