China’s Covid-19 logistics hurdles inhibiting minor metals trade flows

Covid-19 lockdown measures in about a dozen Chinese cities have led to slowdowns in many factories and created logistics hurdles that are disrupting trade flows, including for metals such as lithium, cobalt, silicon and magnesium

Although the government recently loosened restrictions on the movement of goods, truck shortages and port congestion are expected to remain a problem for most market participants in the short term.

The Yangtze River Delta region, a major economic hub centered on Shanghai and a key international gateway to the Asia-Pacific region, has been caught in the center of the epidemic.

Shanghai Port, the world’s largest container port, has remained operational since the city’s mass lockdown started in late March, but the number of ships waiting to be loaded or to discharge cargoes soared in the first half of April due to the backlog and because of a shortage of trucks.

That means containers are in storage yards for longer, which can be a particular problem for refrigerated, or “reefer”, containers transporting perishable goods such as foods or medicines. And those containers are likely to get priority as the ports gradually move to ease congestion.

“Trucking remains limited and the terminals are still congested, while reefer-yard plug capacity remains highly stressed,” Japanese container transportation and shipping company Ocean Network Express told customers in Shanghai in an advisory note on Thursday April 14.

As of April 14, the average dwell time for imported containers surged by 144% to 8.3 days, while that for export containers rose by 20% to 6 days, compared with March 12, according to FourKites, a company that tracks supply chain data from its base in Chicago, United States.

FourKites’ data shows that the volume of goods shipped by sea out of Shanghai dropped by 26% between March 12 and April 4.

One producer of lithium salts that traditionally exports via Shanghai Port, reported delays to its shipments, but said it remained unclear how long those delays would last.

And while China’s Ministry of Transport said on April 21 that container ships are now spending less time in Shanghai Port, many shipping lines have already diverted cargoes to neighboring ports in Jiangsu and Zhejiang provinces to avoid ships getting stuck at Shanghai.

And many businesses, including lithium salts suppliers, have taken the same approach and have shifted goods to other ports in a bid to shorten waiting times.

A second Chinese lithium producer source said its exports of lithium salts to Japan and South Korea were now leaving from Zhangjiagang rather than Shanghai.

But even then, they will still face delays of at least one-week after the port was flooded with goods diverted from Shanghai.

“Shanghai Port is the largest port in China in terms of the availability of vessels, containers, warehouses and staff. With all exports originally scheduled for Shanghai moved elsewhere, those other ports are now [becoming] very congested,” the second lithium producer source said.

Lithium prices

Fastmarkets’ price assessment for lithium hydroxide monohydrate, LiOH.H2O 56.5% LiOH min, battery grade, spot price cif China, Japan & Korea, was $80-83 per kg on Thursday April 21, unchanged from Wednesday.

And Fastmarkets’ price assessment for lithium carbonate, 99.5% Li2CO3 min, battery grade, spot price cif China, Japan and Korea, was $73-78 per kg, down by $2 per kg from $75-80 per kg a day earlier.

Cobalt updates

Cobalt market participants, meanwhile, reported slower efficiency at Ningbo Port, the world’s fourth largest container port and the key port for imports of cobalt hydroxide.

“Due to the [latest] wave of Covid-19 in Shanghai, more materials [that would ordinarily be] delivered to Shanghai ports, are rushing to Ningbo ports. The efficiency has become slower, but currently [the slowdown has had a] limited impact on cobalt hydroxide because of the stagnant market and weak downstream demand in China,” a buyer said.

While most market participants expected only a limited impact on the cobalt market in the short term, they acknowledge that the pain of delayed shipments could increase if the situation is prolonged, especially once downstream demand starts to recover.

Fastmarkets’ assessment of the cobalt hydroxide payable indicator, min 30% Co, cif China was 87-90% of Fastmarkets’ standard-grade cobalt price (low-end) on Wednesday April 20, widening down by 1% from 88-90% on April 13. There was no assessment April 15 due to the public holiday in the United Kingdom.

Fastmarkets’ price assessment for cobalt sulfate 20.5% Co basis, exw China, was 113,000-115,000 yuan per tonne on Wednesday April 20, down by 1,000-2,000 yuan per tonne from 115,000-116,000 yuan per tonne on April 15.

Having identified the ongoing shipping problems in the Yangtze River Delta region, some exporters opted to move freight to ports much further away.

Some lithium salts exporters have even transported cargoes to northern China such as Tianjin Port and Qingdao Port, where there are only minor logistics issues in comparison. But declaration procedures in Qingdao and Tianjin are stricter than in Shanghai, which could mean longer waiting times for exports, a third Chinese lithium producer source said.

And transporting cargoes from factories to more distant ports adds to the logistics costs, market participants said.

Metals, including silicon and magnesium, which traditionally depart from southern Chinese ports, have also been faced with similar delays due to inland transportation restrictions and port congestion.

“Currently, it is not very easy to transport the silicon metals. I heard that many truck drivers prefer not to go the ports for fear of being struck in the ports or on the roads,” a silicon trader said.

Both silicon and magnesium are typically exported from Huangpu Port in Guangzhou, Fastmarkets understands.

Exports of ammonium paratungstate (APT), meanwhile, which are primarily shipped out from the ports of Guangdong and Xiamen, have remained largely unaffected, market participants told Fastmarkets.

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