China heatwave hits supply chain for lithium batteries and solar panels as Sichuan power cut impacts key producers
- Leading producers including GCL-Poly Energy Holdings, Tongwei Solar, Tianqi Lithium and Yahua Lithium are complying with a government-ordered shutdown
- The six-day stoppage will increase prices of lithium salts and polysilicon in the short term, putting pressure on downstream players, analysts say
A heatwave baking parts of China is putting pressure on the supply chain for lithium batteries and solar panels as providers of key materials in central Sichuan province comply with a government mandate to shut down industrial production to conserve electricity for household use.
The province suspended electricity supply to all industrial activities starting on Monday and lasting through Saturday to relieve pressure on an electrical grid that is straining to handle record-breaking power usage at the same time that a drought has reduced hydropower generation.
Several of China’s major lithium and polysilicon producers with production facilities in Sichuan have confirmed they are cooperating with the government’s notice, including leading solar and lithium manufacturers GCL-Poly Energy Holdings, Tongwei Solar, Tianqi Lithium and Yahua Lithium.
“All lithium names are affected, based on our understanding,” said Dennis Ip, head of power, utilities, renewables and energy transition at Daiwa Capital Markets. It’s unclear how many companies are affected in total, but the production halt will “offer positive support to prices of both polysilicon and lithium, thus putting pressure on downstream players”, Ip said.
According to Daiwa, Sichuan produces 30 to 40 per cent of China’s supply of lithium hydroxide and 10 to 20 per cent of its lithium carbonate, as well as 8 to 10 per cent of its polysilicon – a key material in solar panels.