BEIJING SINGAPORE Producers of lithium, fertilisers and other metals shut plants or curbed output in China's southwestern Sichuan province on Monday after it rationed industrial electricity consumption amid its worst heatwave in 60 years.
Industrial users in 19 out of 21 cities in the province were ordered to suspend production from Aug. 15 to Aug. 20 to prioritize residential power supply, according to a notice issued on Sunday by the Department of Economy and Information Technology of Sichuan.
An official at the department said it had implemented power rationing but didn't say anything.
Industry sources said that the latest policy was more severe and there have been some power curbs in place since late July that affected industry production.
Sichuan relies on dams to generate more than 80 per cent of its electricity.
But soaring temperatures and little rain this summer have reduced hydropower generation in the province of 83.75 million, while increasing power demand for air conditioning.
The China Meteorological Administration, which has issued a high-temperature alert for four consecutive days since Aug. 11, said a number of cities will see temperatures of 42 degrees Celsius this week.
The province that produces half of the country's lithium is expected to push up prices of the metal that has surged this year, due to the move by a province that produces half of the country's lithium, used in electric vehicle batteries.
The top Chinese producer Tianqi Lithium and Sichuan Yahua Industrial Group operate plants in the province. Tianqi didn't respond to a request for comment on the curbs, and Yahua could not be reached immediately.
One major producer of the metal has stopped producing, analysts at Daiwa Capital Markets said in a note, without identifying the firm.
Susan Zou, analyst at Rystad Energy said that this will definitely give a boost to lithium prices because the dynamics of EV electric vehicle sales in China look promising during the reminder of this year.
In addition to the high temperature in Sichuan province that is not easing significantly next week, the supply chain is wary of extended power restriction in the region. In stock exchange statements, Aluminium producer Henan Zhongfu Industrial, chemicals maker Sichuan Guoguang Agrochemical, and fertiliser producers Sichuan Meifeng Chemical Industrt and Sichuan Lutianhua said they were suspending production this week.
Some companies still have limited capacity, but they are continuing to operate.
A major iron-alloy producer in the centre of Sichuan has cut its daily output to 150 tons from a normal rate of 400 tonnes, said a source at the company.
Zhongfu said it would suspend parts of its production at two units, Guangyuan Linfeng and Guangyuan Zhongfu, in northeastern Sichuan from Aug. 14, reducing electrolytic aluminium production by 12,900 tons.
In Sichuan, metal producers usually increase their output during the rainy season when hydropower generation increases from May to October.
Hydropower output increased in the first half of the year but has waned since July.
Since March coal power has had to cut output because of hydropower. Lara Dong, analyst at S&P Global Market Intelligence, said when it came to the summer, the hydropower suddenly ran out and is causing problems.
Sichuan's hydropower is a major source of electricity supply to coastal provinces such as Jiangsu and Zhejiang after China invested billions of dollars in power transmission lines to send clean energy from its west to heavily populated eastern regions.
According to official statements and media reports, the provinces of Anhui, Jiangsu and Zhejiang have recently issued power curbs for industrial users to prioritize residential use.