Sichuan: factories must close for a week

The Chinese province of Sichuan has ordered the closure of several factories due to a heat wave and related energy shortages. Toyota, CATL, Volkswagen and Foxconn are among those affected.

Temperatures of 40 degrees

In the region’s cities, temperatures are sometimes 40 degrees and above. This in turn leads to air conditioning systems being used to a high degree, which causes electricity demand to skyrocket. Added to this is the fact that rivers and lakes are drying up due to the heat – making it difficult to generate electricity via hydroelectric power plants. To prevent the energy situation from worsening, the province has now ordered a one-week closure of factories. This is to ensure that private individuals continue to be adequately supplied with energy. However, the Reuters news agency reported that power has also been cut off to private households on an hourly basis.

Large companies affected

There are no exceptions for large and economically significant companies. China’s largest battery manufacturer CATL, for example, is also affected. This, in turn, is likely to have consequences for Western markets that are dependent on China. CATL supplies Tesla, for example, and mines lithium, which is needed for global battery production. The province of Sichuan is also an important location for semiconductor production. Semiconductors, in turn, are currently in short supply on the global market; the escalation in the Taiwan conflict continues to fuel the chip shortage. Overall, prices for corresponding raw materials are expected to rise. Volkswagen and Foxconn have also been forced to close, but have indicated that the forced pause should not have a negative impact on the availability of their own products.

It remains to be seen whether the pause will be extended. In addition, there are energy shortages in other regions of China that are affected by the heat wave. There, too, energy saving is being urged; however, forced closures are not yet known from other affected regions.