At present, the entire nation is united in spirit and working tirelessly to combat the spread of the novel coronavirus epidemic. All member units of the Shanghai Polyurethane Association are firmly implementing the decisions and arrangements of the CPC Central Committee and the State Council on epidemic prevention and control, fully adhering to the principles of “firm confidence, solidarity, scientific prevention and control, and targeted measures.” In light of their specific circumstances, they are making every effort to ensure safe production and safeguard the health of employees, balancing epidemic response with safety and production, and doing their utmost to mitigate the adverse impact of the pandemic on businesses. To assess the epidemic’s effects on the operations and production of its members, the Association’s Secretariat conducted a preliminary survey of major member enterprises via WeChat, telephone, and questionnaires. The findings are summarized below:

I. Current Overview of Business Operations

Upstream large raw-material producers did not shut down over the Spring Festival due to the requirements of their continuous production processes. They are generally facing sharply increased inventory pressure caused by a substantial decline in downstream demand. These companies have been forced to cut production rates, and some have shut down certain production lines to ease inventory pressure. The impact on major raw materials has been relatively limited because they are supplied by supporting enterprises within the industrial park.

2. After some large raw-material producers that halted operations for the Spring Festival resumed work on February 10, equipment utilization remained low—only 20–40%—due to many employees being from other regions and subject to quarantine or observation measures for incoming travelers.

3. Downstream enterprises—primarily manufacturers of polyurethane products, including system materials—are mostly small, medium, and micro-sized businesses. With the exception of a very few firms involved in producing anti-pandemic supplies, which are operating at full capacity, most remain shut down, and no clear timeline can be provided for when they will resume operations. Even those that have reopened are operating at reduced capacity due to a lack of orders.

4. Enterprises actively responded to the government’s call: all companies or positions suitable for remote work were arranged to operate from home, and even those requiring on-site presence adopted a rotating shift system. Each enterprise effectively fulfilled its responsibility for epidemic prevention and control.

II. Main Factors of Impact

Currently, logistics and transportation are experiencing major difficulties. Interprovincial transport is subject to stringent entry requirements in each province, which is affecting product order fulfillment and the supply of raw materials.

2. Insufficient downstream orders. With downstream customers yet to resume production, sales have virtually stalled and order deliveries are being delayed. Affected by the pandemic, companies in key polyurethane application sectors—such as automotive and construction—have postponed resuming work on a large scale, resulting in a sharp decline in orders for member firms; even those that have reopened find themselves with little or no work.

3. Delayed return to work and resulting labor shortages. A large number of employees are unable to return to the factory on time; even those who do return must, in accordance with local requirements, undergo a 14-day self‑isolation period before they can resume work. This has left many companies that have resumed operations facing severe staffing constraints.

4. Rising inventory levels are increasing financial pressure on enterprises. Sluggish sales of finished goods have led to higher inventory, slowing both the turnover of finished products and overall working capital, thereby exacerbating cash flow constraints. Companies are left with no choice but to reduce production capacity as a coping strategy.

5. The main reason some enterprises have not resumed work promptly is that their applications for resuming operations were denied due to failing to meet the required conditions. Additionally, affected by the nationwide delay in business resumption, reduced orders have also compelled some companies to voluntarily postpone restarting operations.

III. Our Recommendations

1. The issue of disrupted logistics for businesses should be resolved as soon as possible. Efforts should be made to ensure that normal production and operational activities proceed in an orderly manner, thereby maintaining stable business operations.

2. The approval process for resuming business operations should be expedited. Enterprises should actively seek support from local governments at all levels and, while ensuring effective epidemic prevention and control measures are in place, resume production or return to normal operations as soon as possible.

3. The government should assist businesses in supplying anti-pandemic materials to prevent public panic caused by inadequate prevention and control measures.

IV. Shanghai’s 28 Support Policies

Businesses generally report that the municipal government promptly introduced support policies when companies faced difficulties, helping them regain confidence. The pandemic’s impact on small and medium-sized enterprises will persist for some time; therefore, they hope the government will further strengthen its support measures, such as temporarily exempting or reducing corporate value-added tax, income tax, and related surcharges; temporarily waiving or reducing social security contributions; providing subsidies to stabilize employment; facilitating corporate access to loans; and lowering utility costs, including electricity and natural gas.

Shanghai Polyurethane Industry Association

February 18, 2020