Sichuan Heat Wave, Chinese Government Asks Battery Factory To Temporarily Close Operations

JAKARTA - The world's largest maker of electric vehicle batteries, Contemporary Amperex Technology Co. Limited (CATL), and Intel are some of the big companies that have closed their factories for six days in China's Sichuan province. According to reports by CNN and Bloomberg, this action was forced to do with electricity shortages related to the heat wave in the area.

The move affects factories belonging to companies such as battery supplier Tesla CATL, Apple supplier Foxconn Technology, Toyota, Texas Instruments, Volkswagen, Onsemi, and many more.

China ordered all factories in Sichuan to shut down operations until August 20 to ease the stress it puts on the power grid after China's worst heatwave in 60 years resulted in increased use of air conditioning.

According to CNN in China during the heatwave, temperatures shot up to 104 degrees Fahrenheit (40 degrees Celsius) in some cities.

Authorities said they had been trying to conserve electricity for residences in the region as officials warned Sichuan was facing "the most severe and extreme moment" in power supply, Chinese state media Sichuan Daily reported. That's probably because the region relies on hydropower, which makes it particularly vulnerable to heat waves and droughts that also dry up dam reservoirs.

As CNN notes, Sichuan is an important area for the semiconductor and solar panel industry. Manufacturers flock to this mineral-rich region to source raw materials used in the solar photovoltaic and electronics industries, such as polysilicon — a key ingredient in solar panels.

The province is also an important mining center for lithium, which is used to produce electric car and smartphone batteries.

Some analysts believe the temporary shutdown could increase the prices of polysilicon and lithium as supplies now fall. On Aug. 17, just two days after the shutdown, industry officials confirmed to Bloomberg that polysilicon prices were indeed rising.

However, some companies do not anticipate too much of this disruption. According to Bloomberg, Foxconn - which makes Apple's iPad in the region - said the drought had not had much of an impact on them. Volkswagen, also said on Monday, August 15, that it did not expect long delivery delays.