Now stricken by a new wave of COVID-19 outbreaks, China's strict lockdown measures have dealt an enormous blow to the NEV industry, two weeks after the industry was blindsided by record-high nickel prices on the London Metal Exchange.
NEV Sector Faces Headwinds Amid Lockdowns, High Prices, and Supply Chain Disruptions
Logistical Woes and Raw Material Prices Weigh on Market Outlook
Soaring raw material prices and ongoing logistics issues have cast a shadow over the near-term outlook for China’s New Energy Vehicle (NEV) sector. Market participants do not expect significant improvements within the next two weeks, as the country continues to monitor domestic infection levels and the impact of widespread lockdowns.
Copper Imports Slow Amid Lockdowns
Domestic demand for copper—crucial for EV wiring—was initially expected to rise with strong EV sales. However, the outlook for cathode imports has deteriorated, with import arbitrage mostly closed and trade financing pressures mounting through March.
Strict lockdowns in Shanghai have sharply curbed demand, as sellers face transport barriers in moving or relocating stock between cities. “Truck drivers are avoiding Shanghai for now because it is taking so much longer to test,” said a Chinese trader.
Shanghai’s extended lockdown, impacting many of China’s key warehouse hubs, is likely to delay any recovery in copper demand. From a macroeconomic perspective, continued COVID restrictions are expected to weaken the overall Chinese economy, further diminishing copper imports.
As a result, April copper import volumes are likely to decline, with both the lockdowns and geopolitical instability from the Russia-Ukraine conflict cited as key risks. As of April 1, S&P Global Commodity Insights assessed Chinese copper import premiums at $20/mt plus LME cash, CIF China—unchanged since March 23.
Battery Metals Market Remains Flat
The battery metals market also saw dampened sentiment, with activity slowing throughout March due to elevated salt prices. Chinese lithium prices—after a six-month rally—stabilized in late March at around Yuan 500,000/mt, as precursor and cathode manufacturers pushed back on high prices, anticipating corrections despite producers insisting that demand will continue to outpace supply.
Midstream and downstream players have reportedly cut production. Battery manufacturers within the 3C sector (computer, communications, and consumer electronics) significantly lowered run rates in response to shrinking profit margins.
Congestion at several southern ports, where spodumene—a key raw material for lithium salt production—typically arrives, may also pose challenges. “This would provide additional support to lithium salt prices if refiners are unable to source material for production,” said a trader.
As of April 1, S&P Global assessed:
- Battery-grade lithium carbonate: Yuan 500,000/mt (DDP China)
- Battery-grade lithium hydroxide: Yuan 496,000/mt (DDP China)
Nickel and Cobalt See Weak Demand Despite Stable Logistics
Nickel and cobalt salts faced less disruption from port congestion, but demand remains subdued. “Nickel prices on the LME haven’t dropped to normal tradable levels yet,” said a Chinese trader. In the case of nickel sulfate, logistics was not a major concern—high metal prices were the primary limiting factor.
Outlook: NEV Sector in a Holding Pattern
Two weeks after reeling from the record nickel price spike on the LME, the NEV industry in China is once again under pressure—this time from renewed COVID-19 lockdowns, high input costs, and logistical hurdles. Market sentiment remains bearish, with little expectation of a turnaround until major cities like Shanghai ease restrictions and supply chains begin to normalize.
