Lithium, CATL factory closes in China: it's too hot

Lithium, CATL factory closes in China: it's too hot

Lithium, CATL factory closes in China

A few days ago the Chinese government forced Toyota Motor Corp and CATL - the world's largest producer of lithium batteries - to stop production at the factories located in the Sichuan province due to the high atmospheric temperatures reached; in this area of ​​the world a large part of the electricity needed is produced through hydroelectric systems, but the heat and drought prevent the turbines from running, which are stopped due to lack of water also due to the electricity consumption increased by the use of domestic air conditioners.

The news is particularly tragic for the automotive market, which today more than ever depends heavily on the production of lithium-ion batteries by a global giant like CATL; the other large companies located in the same area are not faring much better, with Volkswagen having to reduce the pace of work due to the lack of electricity available and Foxconn, which has slowed down the production of iPads without affecting the production volumes too much. .

According to some rumors circulated in recent days, we could soon reach the point that it will make it necessary to ration electricity to homes and offices: a solution that will make many turn up their noses, considering that in the region lately 40 ° C has touched and exceeded, temperatures that have also contributed to ruining many crops in the cultivated fields of the area, giving rise to a food crisis parallel to the energy one.

This whole situation will only begin to improve with the return of rains and milder temperatures, but in the meantime a significant increase is expected in the cost of lithium and polysilicon, fundamental material in the production of solar panels.

Toyota, CATL shut plants in China’s Sichuan

Toyota Motor Corp and Contemporary Amperex Technology Co Ltd (CATL, 新能源科技), the world’s top battery maker, are closing plants in China’s Sichuan Province as a drought-induced power crisis worsens.

The Japanese automaker shut a factory in the provincial capital of Chengdu and would keep operations suspended until Saturday, company spokesperson Shiori Hashimoto said.

The Chengdu plant produces about 30,000 vehicles a year, including the Landcruiser Prado, the manufacturer’s Web site says.

CATL halted activity at its major lithium battery base in the city of Yibin through the same date, a local business publication reported.

The company did not respond to an e-mailed request for comment.

The power cuts have affected more than 70 percent of steel mills in Sichuan, which have either halted production or started rationing, Mysteel said in a note this week.

Henan Zhongfu Industry Co (河南中孚), an aluminum smelter, is halting production for a week for some production units in Sichuan.

The Chinese price of aluminum is up about 3.5 percent since Monday’s close.

Sichuan, one of China’s most populous provinces, is highly reliant on hydropower. That makes it particularly vulnerable to a heat wave and drought that have pushed up air-conditioning demand and dried up reservoirs behind hydro dams. It is a key manufacturing hub and is also important for the production of materials, including polysilicon and lithium, that are vital to the energy transition.

The southwestern province has become a key development hub for battery makers aiming to harness hydropower to reduce emissions in their production processes.

CATL has about 100 gigawatts of existing and planned capacity in the province, the most after Fujian, according to BloombergNEF.

Volkswagen AG on Monday said its factory in Chengdu is affected by power shortages, but that it was only expecting slight delays in deliveries to customers. Foxconn Technology Co (富士康科技集團) also makes Apple iPads in the province, but said it was seeing only limited impact from the drought so far.

While other regions in China are dealing with curtailments on a smaller scale, a major power crisis is likely to be mostly limited to Sichuan because of its unique reliance on dams for electricity.

Many Chinese provinces rely more on coal for power, and generators stocked up on the fuel in the run-up to summer as COVID-19 lockdowns weighed on demand. The heat wave has reversed that, with coal consumption for the first two weeks of this month rising 15 percent from a year earlier, the government’s top planning agency said on Tuesday.

Temperatures in Chengdu yesterday were as high as 38oC after soaring above 40oC in parts of Sichuan on Tuesday, with humidity making it feel hotter.

Some office buildings in the city have stopped air-conditioning as the power shortage becomes more severe, Securities Times reported.

Sichuan is a major rice and corn producer, and the National Meteorological Center said this week the drought could damage crops and hinder growth.

The heat wave is not limited to just Sichuan and is affecting the wider Yangtze River basin. There is only light-to-moderate rain expected in the next week and the Three Gorges Dam, the world’s largest, in neighboring Hubei Province, would release more water in the next five days to help replenish the middle and lower reaches of China’s largest waterway, Xinhua news agency reported.

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