The province is also China’s lithium mining hub — a key component of electric car batteries — and the shutdown may push up the cost of the raw material, analysts said.
Sichuan, one of China’s largest provinces with 84 million people, told 19 out of 21 cities in the region to suspend production at all factories from Monday to Saturday, according to an “urgent notice” issued on Sunday by the provincial government and the state grid.
The decision was made to ensure that enough power is available for residential use, the notice said.
Shutting down factories for the week could tighten the supply of polysilicon and lithium and push prices higher, Daiwa Capital analysts said in a note to clients.
Several Chinese companies have warned their production could be affected by the Sichuan power cut, including Sichuan Haowu Electromechanical, an auto part manufacturer, and Sichuan Lutianhua, which produces fertilizers and chemical products.
Apart from Sichuan, other major Chinese provinces — including Jiangsu, Anhui, and Zhejiang — have also urged business and households to conserve power as the heat wave has depleted electric supplies.
In some regions, offices have been ordered to increase their AC temperature to above 26 degrees Celsius or shut down lift services for the first three floors, so as to conserve electricity.
The extreme heat in China has also resulted in crop failures in many parts of the country, adding to inflationary pressures last month.
He pointed out that the extreme heat has caused droughts in some agricultural areas in the south. In the north, rainfall and flooding also resulted in some crop failures.
“August and September are the key periods for the formation of autumn grain production. [We must] pay close attention to the impact of natural disaster, insects and disease on our country’s food production,” he added.