'Return to Work After 2 Months' Shanghai Lockdown Lifted... Korean Companies Breathe a Sigh of Relief

Shanghai City in China Lifts Lockdown After 65 Days
Korean Companies Hit by Logistics, Supply Chain Disruptions, and Production Halts Breathe Easier
Full Normalization to Pre-COVID-19 Conditions Unlikely in the Near Term

[Image source=Yonhap News]

[Asia Economy Reporters Sunmi Park, Hyunseok Yoo, Chaeseok Moon] "We stayed home for two months. Most Korean companies with offices in Shanghai have switched to normal commuting as of the 1st. There is a mood to speed up concretizing second-half strategies following the normalization of logistics and supply chains." (Korea Trade Association Shanghai Branch staff)

As Shanghai, China attempts economic normalization two months after being locked down under the 'Zero COVID' policy, Korean companies that suffered from logistics and supply chain disruptions and production halts have also begun to breathe easier. Although it will be difficult to fully return to pre-COVID-19 conditions immediately, there is growing optimism that gradual normalization will occur as logistics issues are being resolved.

According to the industry on the 2nd, Shanghai, which began lockdown on March 28, lifted all lockdown measures the previous day. After 65 days, residents can freely move outside residential complexes, and restrictions on cars and motorcycles have been removed.

Employees affiliated with Korean companies have also shifted from remote work back to normal commuting. Jinwoo Park, manager of the Korea Trade Association Shanghai Branch, explained, "Since most Korean companies have switched to normal commuting, they plan to engage in communication and meetings among Korean companies that were not possible before, review second-half strategies, and prepare for the Shanghai International Import Expo scheduled to be held offline on November 1." He added, "Some Korean company factories had been operating under strict regulations as part of the 'Whitelist' of companies permitted to resume operations, but with the complete lifting of the lockdown, regulations are expected to be significantly relaxed."

The domestic electronics and display industries are placing their greatest hopes on resolving logistics and supply chain disruptions. An electronics industry official said, "The direct impact of the lockdown was not significant, but normalization of manufacturing and logistics within China will have a positive effect on the global economy." Another industry source stated, "Electronic products faced component supply issues from China, but we minimized disruptions by using stockpiled inventory. With the lifting of the lockdown, such risk factors have disappeared."

A display industry representative also said, "There were production delays and restrictions on transporting finished products due to irregular component supply from partners, but gradual recovery is expected. The lockdown impact is currently at its final worrying stage, and improvements are anticipated in the second half of the year."

Major heavy chemical companies also showed generally positive reactions. In particular, the steel industry is anticipating a rise in iron ore prices due to China's economic normalization. Generally, an increase in iron ore prices positively affects steelmakers' performance. According to Korea PDS, a raw materials market analysis firm, on the 1st, the price of September iron ore contracts on the Dalian Commodity Exchange (DCE) traded at 901.5 yuan per ton, marking the highest price in over a month since 903 yuan per ton on April 21.

A steel company official with a local Chinese subsidiary said, "Even during the Shanghai lockdown, we prepared detailed transportation plans every one to two weeks for logistics related to the Chinese subsidiary and operated the factory work system flexibly. During the lockdown, restrictions such as no movement outside confirmed destinations, no driver disembarkation, and prior submission of transportation plans were eased, so logistics difficulties are expected to be resolved."

The aviation and shipping industries, which had reduced cargo flights during the Shanghai lockdown, also expressed expectations for flight normalization. An aviation industry official said, "Flights were reduced by about half since the end of March, but now we have returned to normal schedules." A shipping industry representative said, "No significant changes have been detected yet, but if production at factories around Shanghai increases, there could be an increase in cargo volume."

There is also speculation that the Chinese government's large-scale consumption promotion activities to boost consumer sentiment, which was dampened by the Shanghai lockdown, will act as a positive factor for Korean consumer goods companies operating in China. The Korea Trade Association Shanghai Branch said, "The biggest shopping event in China’s first half of the year, the ‘618 Shopping Festival,’ is approaching, and Korean consumer goods companies are expected to benefit from 'revenge consumption.'"

This content was produced with the assistance of AI translation services.