Electricity crunch in Sichuan Province shortcuts lithium output
Published: Aug 24, 2022 08:47 PM
Photo: Courtesy of CATL

Photo: Courtesy of CATL

Southwest China's Sichuan Province, a lithium hub in the country,  extended industrial power cuts to Thursday, which could shortcut lithium enterprises' production for over 10 days, but they are expected to make up for the losses soon after reopening, companies and industry experts said on Wednesday.

With lithium resources accounting for about 50 percent of the national total, Sichuan is a leading province for power batteries, and a group of leading firms in the sector have invested in the province, including the world's largest battery maker CATL, EVE Energy Co and Shenzhen Chengxin Lithium Group Co.

As a result of the high temperatures and electricity crunch in the province, a couple of companies in the industry have halted production, according to media reports.

Chengxin Lithium has three lithium production facilities in Sichuan, with combined annual capacity of 70,000 tons. The company told the Global Times on Wednesday that its lithium projects in Sichuan remain suspended, but "the impact is not very big due to the temporary nature of the measure."

Sichuan Guoguang Agrochemical Co said in a filing to the Shenzhen Stock Exchange that production at two of its subsidiaries - Sichuan Runner Technology Co and Chongqing Yi'er Shuangfeng Technology - remained suspended due to tight power supply till Thursday.

"However, the suspension at the two subsidiaries will not have a significant impact on the company's revenue," the company said, noting that it has sufficient inventories as well as power generators to meet temporary need for orders.

CATL declined to comment.

On August 14, the provincial government told 19 out of 21 cities to suspend factories' production from August 15 to last Saturday, except for certain crucial enterprises. The suspension was later extended to Thursday.

Considering the time needed to warm furnaces for producing lithium materials, the impact will be longer than 10 days, but companies will be able to make up for the loss after they return to full capacity, Wu Chenhui, an independent industry analyst, told the Global Times.

The prolonged power cuts in Sichuan are expected to reduce the output of lithium carbonate in August by 1,250 tons, lithium hydroxide by 3,050 tons and lithium iron phosphate by 9,750 tons, among other products, according to the Shanghai Metals Market, an industry news portal.

Prices in the sector continued to rise on Wednesday, with that of lithium carbonate used for batteries growing 3,500 yuan ($510) per ton to 491,000 yuan per ton, according to statistics from consultancy Mysteel. 

Cui Dongshu, secretary general of the China Passenger Car Association, said this is mainly due to faster expansion on the demand side than the supply of lithium resources, as lithium mining requires various approvals and certificates, and there are more uncertainties if the mines are located overseas.

"The high lithium price doesn't reflect real market supply and demand, as companies trade it via long-term contracts," Cui said, noting that there is sufficient lithium supply and the sales of new-energy vehicles will continue to rise during the upcoming months.

According to the Ministry of Industry and Information Technology, China's installed capacity of power batteries totaled 154.5 gigawatt hours (GWh) in 2021, accounting for 52 percent of the global total. 

Sichuan is one of the regions in the world that has the most complete power battery industry ecosystem. The province aims to become a world-class power battery center by 2025, with lithium mining capacity of 5 million tons and power battery capacity of 350 GWh, during the 14th Five-Year Plan period (2021-25).

Global Times