"Everyone Is Struggling"
2022 has been a tough year for everyone.
Economist Liu Shengjun pointed out four key reasons why this round of the pandemic has had a bigger impact than in 2020:
The Shanghai Factor: The core of this impact is Shanghai. Unlike Wuhan, Shanghai is China's financial hub and advanced manufacturing center, exerting a greater influence on domestic and even global industrial chains.
Time Span Factor: This is already the third year of the pandemic. For many small and medium-sized enterprises, repeated outbreaks have pushed their resilience to the limit—they can't just "grit their teeth" and pull through. It's like holding a barbell: you can manage 10 minutes, but an hour will definitely wear you out.
International Factor: In the first half of 2020, the whole world was severely hit by the pandemic. This year, most overseas countries have moved toward "normalization," and the "pandemic dividend" that boosted China's exports over the past two years is now fading.
Overlaying Factors: In addition to the pandemic, there are overlapping influences such as the Russia-Ukraine war, the lagging effects of real estate regulation, and strong supervision in financial and platform economy sectors.
Advancing Despite Difficulties! On May 23, the State Council executive meeting decisively introduced 33 measures in 6 areas, with "tax refunds and cuts" as the priority, demonstrating the central government's concrete determination and confidence in stabilizing the economy. When people are united, they can move mountains. Winning the "economic defense war" requires full cooperation from all sectors of society.
"Everything Is Rising"
On the one hand, pandemic-induced global production cuts and blocked shipping routes, combined with insufficient supply and economic recovery, have caused sharp price hikes in upstream resource products.
Take chips as an example. Renowned scholar Liu Run shared a story: in June last year, a man was robbed in Hong Kong. When the police arrived, they asked what was stolen. He said, "Chips." Why? Because in 2021, chips were extremely expensive.
A chip that cost 179 RMB in mid-March last year surged to 1,142 RMB by late March!
Why such a dramatic increase? Severe shortages. Due to the pandemic, adults worked from home and children studied online. Previously, one computer sufficed, but now each person needed one. As a result, computer shipments soared by 73.49% year on year.
This drove growth in computer accessories: routers (+29%), mice (+31%), keyboards (+64%), headphones (+134%), monitors (+138%), and webcams (+179%). All these devices require chips, leading to sudden shortages.
Additionally, extreme weather last year—such as heavy rains in northern regions, droughts in southern China, blizzards and hurricanes in the U.S., and floods in Europe—also fueled raw material price hikes.
"The Lubricants Business Is Far Tougher Than Imagined"
Everyone is struggling, and everything is rising, but the lubricants business has faced even harsher challenges. As a petroleum derivative, lubricant base oil has been hit by both skyrocketing crude oil prices and an "imbalance in supply and demand between Asia and Europe." Since the start of this year, multiple factors have caused continuous price hikes in lubricant base oil. Hydrotreated base oil rose from 6,500 RMB/ton at the end of last year to 9,700 RMB/ton in early June—a 50% increase. Excluding consumption tax and other factors, the naked price surged by over 70%. Lithium hydroxide, an additive for lubricating grease, has continued to rise sharply, from less than 50,000 RMB/ton in 2020 to over 500,000 RMB/ton now.
"When it rains, it pours." Lubricants industry players have worked hard, but due to the temporary asymmetry between purchase and sales values, the industry struggles to absorb cost increases. Sales prices can't keep up with rising procurement costs, making operations unsustainable.
"We lose money on every ton sold—we really can't go on."
A lubricants company in Jiangsu confessed to customers: "The contract price was agreed last year. Base oil prices have risen by over 3,000 RMB/ton in April, so we lose thousands on each ton sold. We hoped things would ease in June, but we heard prices will rise by another 2,000+ RMB/ton. We want to ensure supply, but we can't afford the losses. Either agree to a price increase, or we have to stop operations." This is likely the shared sentiment of all lubricants practitioners.
"Price hikes again, and shortages—dealers' complaints are mounting."
A regional authorized dealer of an international brand complained: "We understand the need for price hikes, but a one-time increase of over 20% is hard to accept. Even after the hike, supplies are often unavailable, and on-site service teams can't arrive. Our end customers are furious, and we're extremely frustrated."
"Every order is a difficult choice."
The key account director of a state-owned energy giant said frankly: "Costs are rising too fast. We want to take orders but fear losses. Every order requires careful calculation to avoid new deficits. Lubricants are fully market-driven, and our annual R&D investment is huge—operating at a loss is unsustainable. A regional manager was recently summoned by headquarters due to operational losses. More importantly, it's not just about prices; supply chains are strained. Additives and chemical materials are in short supply, and pandemic-related logistics costs are increasing, piling more pressure on costs."
The lubricants business has truly been arduous in 2022. According to professional agencies, global oil demand continues to grow, bullish forces prevail, and oil prices are expected to rise further. The petroleum industry will remain at high prices for the long term.
As mentioned earlier, winning the "economic defense war" requires full cooperation from all sectors. For the lubricants industry to overcome difficulties and ensure resumption of work and production for thousands of households, it needs closer collaboration among manufacturers, channels, and customers. Producers should strive to control costs, while consumers should adjust expectations—more understanding and trust can go a long way.
Hold onto hope and wait for spring to come!