September 26, 2022

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Heat wave in China: Sichuan closes factories to save energy

Heat wave in China: Sichuan closes factories to save energy

Sichuan is a major industrial location for the manufacture of semiconductors and solar panels, and power rationing will hit factories of some of the world’s largest electronics companies, including apple (AAPL) supplier Foxconn and Intel Corporation (INTC).

Analysts said the province is also the epicenter of China’s lithium mining – a key component of electric car batteries – and the shutdown could increase the cost of raw materials.

facing China The most intense heat wave in six decadeswith temperatures exceeding 40 °C (104 °F) in Dozens of cities. The intense heat has caused a high demand for air conditioners in offices and homes, putting pressure on the power grid. As drought exhausted River water levels, which reduces the amount of electricity produced at hydroelectric power plants.

Sichuan, one of China’s largest provinces with a population of 84 million, has asked 19 out of 21 cities in the region to suspend production at all factories from Monday to Saturday, according to an “urgent notification” issued Sunday by the provincial government and state network. .

The notice said the decision was made to ensure that sufficient power was available for residential use.

The southwestern province – which is also a major hydropower hub in China – has been experiencing extreme heat and drought since July. Since August 7, the prefecture’s heat wave has intensified to its “maximum level in six decades,” and rainfall has decreased by 51% from the same period in previous years, according to an article. Posted on the government website Tuesday.
Senior provincial officials warned Monday that Sichuan is currently facing the “most dangerous and extreme moment” in power supply, according to the government. Sichuan Daily.
Luzhou, a city in Sichuan, announced last week They will turn off city street lights at night to conserve electricity and reduce pressure on the power grid.
Sichuan is rich in mineral resources such as lithium and polysilicon – the main raw materials in the solar photovoltaic and electronics industry. Many international semiconductor companies have factories in Sichuan, including Texas Instruments (TXN)and Intel, Onsemi, and Foxconn. Chinese lithium battery giant CATL, which supplies batteries Tesla (TSLA)also has a factory in the area.

In a note to clients, Daiwa Capital analysts said plant closures for this week could reduce supply of polysilicon and lithium and push prices higher.

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Several Chinese companies have warned that their production may be affected by the power outages in Sichuan, including Sichuan Haowu Electromechanical Corporation, an auto parts manufacturer, and Sichuan Lutianhua Corporation, which produces fertilizers and chemical products.

Heat wave threatens energy shortage and pork prices rise in China

Aside from Sichuan, other major Chinese provinces – including Jiangsu, Anhui and Zhejiang – have urged businesses and households to conserve energy as the heat wave has depleted electrical supplies.

In some areas, offices have been ordered to raise the air conditioner temperature above 26°C Or shutting down elevator services for the first three floors to conserve electricity.

Inflation risk

The extreme heat in China has also led to crop failures in many parts of the country, adding to inflationary pressures Last month.

“Affected by the persistent high temperature in many places, the price of fresh vegetables rose 12.9% year on year, which is much higher than the same period in previous years,” said Fu Lingwei, a spokesman for the National Bureau of Statistics and He said at a press conference on Monday in Beijing.

He pointed out that the intense heat caused droughts in some agricultural areas in the south. In the north, rainfall and flooding have also caused some crops to fail.

“August and September are the two primary periods for the formation of autumn grain production. [We must] We pay close attention to the impact of natural disasters, insects and diseases on food production in our country.”