Industries including metals producers are bracing for curbs on electricity supplies in Sichuan province, as parts of China grapple with extreme weather that’s lifting demand and disrupting hydropower generation.
Power consumption in Sichuan reached a record high on Monday with temperatures above 35C (95F), according to local media. That’s exacerbating already low hydro dam levels after a drought in the southwestern province last year.
Aluminum smelters near the provincial capital of Chengdu have been ordered to reduce power consumption, which may see annualized capacity of about 50,000 tons of the metal idled, Shanghai Metals Market said in a note. Silicon producers in Sichuan’s Ebian county have been asked to cut production from July 3-21 due to extreme weather, according to a notice reported by researcher Mysteel.
Sichuan is only responsible for 1 million tons of the nation’s total aluminum capacity of more than 40 million tons, but the heat is fueling concerns that there could be a repeat of last year’s shutdown of all local smelters. That hit output from a variety of sectors, including suppliers to Tesla Inc. and solar module producers.
Still, current supply risks may be offset by the resumption of units in nearby Yunnan province, where smelters are bringing back more than 1 million tons of capacity by next month after heavy rain in June eased shortages. Across the entire country, hydro generation fell about 33% in May from a year earlier, according to the National Bureau of Statistics.
President Xi Jinping visited State Grid Corp. of China’s research unit in Nanjing last week and reiterated that energy security and safety was of great importance to the country. The nation has ramped up coal production and imports of the fossil fuel in a bid to secure enough power supplies this summer.
Aluminum prices rallied as much as 2.1% on the London Metal Exchange, and were trading up 1.3% at $2,175 a ton as of 11:44 a.m. local time. Other metals were mixed, with additional stimulus measures for China’s real estate sector lending some support. To revive the market, the country’s regulators have long been expected to come up with more supportive policies.
--With assistance from Kathy Chen.
