Power crunch in Sichuan adds to industry’s woes in China

Bloomberg

Sichuan’s worst drought in more than a half century spurred the Chinese province to extend industrial power cuts and activate its highest emergency response, adding to manufacturers’ woes as they shut down factories in the region.
Temperatures above 40 degrees Celsius (104 degrees Fahrenheit) and scant rainfall, along with surging demand for air conditioning, have caused gaps in power supply, the southwestern province said. Officials extended an order that curtails electricity to some industrial users to August 25 from August 20 originally, according to company announcements.
“Sichuan is now facing the hottest temperatures and the worst drought of the past 60 years,” Morgan Stanley analyst Simon Lee said. Rainfall along the Yangtze River since July is 45% below normal, the lowest since 1961.
Higher demand fuelled by scorching temperatures across China is also threatening wider disruptions, with factories in Jiangsu and Chongqing facing outages and outdoor lighting switched off on Shanghai’s The Bund waterfront.
The extreme weather in China is worsening a global power crunch and squeezing commodity supplies at a time when nations are struggling to cope with the upheavals caused by Russia’s invasion of Ukraine. Beyond Asia, droughts and heat waves are causing damage from Arizona to the Rhine, bringing into sharp focus the repercussions of climate change.
The drought also comes as Chinese companies are already contending with Beijing’s adherence to Covid Zero, which includes sudden lockdowns. The power shortages are now threatening supplies of everything from grains and aluminum to battery materials used in electric vehicles.
Sichuan has halted its entire aluminum capacity of 1 million tons due to power shortages, according to a survey from researcher Mysteel. The broader impact on China’s economy, though, is expected to be smaller than in 2021, when
outages were more widespread and soaring coal prices discouraged power plants from increasing output.
Sichuan, which relies on hydropower for 82% of its power generation, is bearing the brunt of the drought.