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Shanghai's auto makers set to resume production despite rising infections: sources

Highlights

Automobile makers face production hurdles amid pandemic

Raw material, auto parts shortages reported

  • Author
  • Staff
  • Editor
  • Aastha Agnihotri
  • Commodity
  • Electric Power Metals

The automobile manufacturers in Shanghai are likely to restart production in the week ending April 23, although it may take a while to achieve full capacity with several workers still isolated and logistics hampered by rising pandemic cases, industry sources said.

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The original equipment manufacturer, auto parts and logistics units of Chinese state-owned SAIC Motor started stress-testing on manpower guarantee, supply chain operation, along with logistics flow on April 18, according to a report released by the group.

The development comes after China's auto makers suspended or reduced production due to supply shortages of parts following pandemic-led lockdowns in Shanghai and nearby cities.

The industry sources warned that several auto makers across the country could be forced to suspend production if the supply chain companies in Shanghai and nearby were unable to find a way to resume production.

Massive production cuts are unlikely to happen in May as a working group dispatched to Shanghai by the Ministry of Industry and Information Technology is making efforts to resolve immediate issues like raw materials supply shortage, said Cui Dongshu, secretary general of China Passenger Car Association, or CPCA, in a report released April 16.

However, some sources remained skeptical about recovery in industrial activity before May, given the sharp rise in confirmed cases in Shanghai in the week to April 22.

"It's still hard to restart production under current circumstances," a source said. "While operating in a closed loop would help reduce the likelihood of positive cases, I think many companies are not willing to take the risk and face another shutdown."

Nio, one of the leading electric vehicle makers in China, stopped production due to supply bottlenecks, the company said early-April.

There were market talks that Tesla's Gigafactory in Shanghai would also resume operations from April 18 after stopping production on March 28.

An email inquiry from S&P Global Commodity Insights to Tesla China did not elicit any response at the time of publishing this story.

Shanghai plays an important role in China's automobile industry and is home to several major auto parts makers.

Vehicle production in Shanghai totaled 2.83 million mt in 2021, accounting for 10.7% of the country's total, according to the data released by National Bureau of Statistics.

The latest wave of the COVID-19 outbreak in the country has impacted about 20% of China's overall car production, the CPCA said earlier.

Lithium salts demand and prices

Although the pandemic may hurt production and sales of new energy vehicle in the coming months, market sources kept an optimistic outlook in the long term.

China's lithium salts prices have been under pressure in the near term, in view of increasing production from salt lakes, soft downstream demand caused by the outbreaks and the government's appeal to bring raw material prices down to "rational levels".

However, prices could remain at elevated levels amid high production costs and a recovery in demand later down the road, sources said.

Platts assessed battery-grade lithium carbonate and hydroxide at Yuan 470,000/mt ($73,665/mt) and Yuan 498,000/mt April 19 on a DDP China basis, down 7.8% and 1.4%, respectively, from a record high mid-March, according to S&P Global data.