Blenders Grapple with China’s Lockdowns

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Blenders Grapple with China’s Lockdowns
China has instituted stringent lockdowns in a number of cities in recent weeks due to a surge in Omicron cases, confining residents to their homes to contain the virus. © Graeme Kennedy

Companies in China’s lubricant industry are striving to continue delivering products to clients during stringent government lockdowns – imposed in a number of cities because of a surge of Omicron coronavirus cases – but it is not a cakewalk.

The Chinese subsidiary of German lubricant marketer Fuchs Petrolub SE posted an open letter to customers recently that sheds light on problems that companies are facing. “Lockdowns, supply chain uncertainties and soaring logistics costs all posed unprecedented challenges to us,” read the letter. Fuchs China is based in Shanghai, China’s financial hub and the epicenter of the current outbreak. The metropolis is in its fifth week of lockdown.

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Fuchs has two lubricant manufacturing plants in China. One facility is in Suzhou, Jiangsu province, which is also under lockdown. The second is in Yingkou, Liaoning province, which started to ease restrictions in mid-April after a monthlong lockdown.

A China-style lockdown confines people to their homes to contain the virus. In the letter, Fuchs apologized for possible delivery delays, adding that it is taking all possible steps to resume production and to deliver products to meet clients’ demands.

Fuchs’ challenges are shared by many other blenders, including Nanjing-based Lopal Technology Co. Officials said the company’s production capability is largely intact as it has 12 facilities across China. But it faces other challenges, among them logistics.

China’s lockdowns prompted local governments to close regional highways to bar vehicles from risky areas, or areas with a great number of COVID-19 cases. China has more than 100 risky cities, according to China’s National Health Commission. Such a measure not only severely disrupted transportation, but also caused logistics costs to soar by as much as 300%, according to Lopal.

In a statement sent to Lube Report Asia, the company said it was leveraging its 35 regional warehouses to ease burdens on transportation and costs. It also relies on an internal system to optimize manufacturing plans to improve delivery efficiency.

Many of Lopal’s distributors have so many employees confined at home that their capabilities to do marketing campaigns were significantly weakened. To take up the slack, Lopal has been advertising in elevators in 114 Chinese cities since April 11.

“We hope our distributors will see sales roar back once the lockdown is lifted,” the company said. “We want to help them go through this difficult time.”

Shanghai-based polyalphaolefin supplier Dowpol Chemical, parent company of Naco Lubrication, halted operations at its plant in that city last year, before strict lockdowns began. Dowpol continues to market PAOs produced in Shanxi province by its partner – state-owned coal giant Lu’an Group. Dowpol officials say the relationship with Lu’an has been helpful during lockdowns.

“Lu’an has the capacity and logistics service to meet our clients’ demand,” said Dowpol co-founder Wu Yuedi.

For its export business, Wu said the company had to ship through ports other than Shanghai. He acknowledged the rocketing logistics cost, saying there will be changes in prices. “No company can bear the cost on its own,” he said. “It will eventually be passed to end users.”

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