ASN General Discussion, page-208

it will come back up once China is back to business as normal.

The Impact Of COVID-19 Outbreak on Lithium Battery Industry Chain May Far Exceed Market Expectations

Apr 18, 2022 13:04CST

Source:SMM

SHANGHAI, Apr 18 (SMM) - Recently, the pandemic situation in Shanghai has deteriorated, and the neighbouring Jiangsu and Zhejiang have also been affected.

SHANGHAI, Apr 18 (SMM) - Recently, the pandemic situation in Shanghai has deteriorated, and the neighbouring Jiangsu and Zhejiang have also been affected. Changchun, which saw an outbreak of COVID-19 at a much earlier time, is still fighting the pandemic. This wave of COVID-19 has shocked the entire new energy industry chain. The automotive industry was the first to suffer. FAW-Volkswagen in Changchun was shut down on March 13, followed by Tesla and SAIC-Volkswagen in Shanghai, and there is no word as to when they will re-open.
In addition, there are a large number of auto parts companies in Jiangsu, Zhejiang and Shanghai, who were severely hit by the pandemic. NIO announced the suspension of production on April 9 mainly due to the lack of auto parts. At present, car makers across the country are plagued by auto parts shortages, leaving many of them no option other than to slash or halt their production. This has sent ripple effect to upstream battery companies, whose orders declined. Some battery companies said that the pandemic has affected their annual production plans, and most battery companies reported a decline in their orders for delivery in April-May.
Taking Tesla’s Shanghai factory as an example, which produced about 17,000 new energy vehicles per week before it was closed from March 28. Considering that the pandemic in Shanghai may not be brought under effective control in a short period of time, it is expected that the factory will not re-open until the end of April at the earliest, which will cause a loss of at least 85,000 new energy vehicles. Assuming that all the models whose production was stopped were standard range Model 3 equipped with 55Kwh batteries, the closure of this factory would reduce the demand for LFP and lithium salts by nearly 11,000 mt and roughly 3,000 mt respectively.
After taking into account the production cuts and suspension of other car companies, the demand for upstream battery materials is estimated to fall 15-20% in April, and the purchases of batteries will also decrease accordingly. In April, the first-tier battery companies have already reduced their raw material purchases due to excessively high lithium prices and sufficient inventory. Under the impact of the pandemic, the purchases of battery materials are expected to continue to decline, and the overall purchases from April to May are expected to drop by more than 15%. The impact of the pandemic has far exceeded market expectations. At present, the supply of lithium is increasing month-on-month, while the demand has fallen sharply. Lithium prices will remain in the downward trajectory as the lithium salt market has shifted from supply deficit to surplus.