China's Sichuan shuts factories amid power shortage

China's Sichuan province has ordered all factories to shut down until Saturday to tackle a power shortage in the region as a blistering heat wave across the country sent power demand soaring and dried up reservoirs.

State media reported that the province announced industrial power cuts to 19 cities and prefectures from Monday to Saturday. Sichuan is China's lithium mining hub and a key manufacturing location for the semiconductor and solar panel industries and the power shortage will hit factories of Apple supplier Foxconn and Intel. Several Chinese companies have warned their production could be affected by the Sichuan power cut.

The extreme heat in China has also caused crop failures in many parts of the country, adding to inflationary pressures last month. National Bureau of Statistics officials said that the extreme heat has caused droughts in some agricultural areas in the south. In the north, rainfall and flooding also caused crop failures to certain extent.

State media reported that China has declared a high temperature red



alert on Wednesday. China is facing its fiercest heat wave in six decades, with temperatures crossing 40 degrees Celsius in many parts. The extreme heat has caused a spike in demand for air conditioning in offices and homes, putting pressure on the power grid. 

The drought has also depleted river water levels, reducing the amount of electricity produced at hydropower plants. According to reports, to fight the drought and meet the irrigation needs, water has been released from reservoirs.

Sichuan, the southwestern province which is also a major hydropower hub in China has had an extended period of heat since July, which has brought soaring power demand. The power cuts may hit the production of industrial silicon at the upstream of the PV sector, and it is estimated that 50-60 percent of Sichuan's output will be affected, state media reported. Sichuan's output accounts for one-sixth of the total in China, so prices may rise. Power cuts may also tighten the supply of polysilicon and lithium and push prices higher.