SMM Exclusive Report: Impact on the Lithium Battery Industry Chain Looks Set to Expand as Sichuan Extends Its Power Rationing Policy

SHANGHAI, Aug 23 (SMM) – SMM has been tracking the impact of power rationing on the lithium battery industry chain since Sichuan officially issued a power rationing notice on August 15. On August 15, the Sichuan Provincial Department of Economy and Information Technology and the State Grid Sichuan Electric Power Company jointly issued the Emergency Notice on Expanding the Scope of Cutting off Electricity Supply to Industrial Enterprises in Favour of Residents. According to the Notice, starting from August 15, the staggered power use shall be cancelled, and the implementation scope of cutting off electricity to industrial enterprises in favour of residents will be expanded in 19 cities (prefectures) in the province (except Panzhihua and Liangshan prefecture). All industrial power users who are included in the Sichuan Power Grid Orderly Power Use Programme (including whitelisted key enterprises) shall stop production (except for security purpose). This will take effect from 00:00 on August 15, 2022 to 24:00 on August 20, 2022. However, on August 20, the Sichuan Provincial Department of Economy and Information Technology and the State Grid Sichuan Electric Power Company issued another notice, which will extend the power rationing from 00:00 on August 20, 2022 to 24:00 on August 25, 2022.

The regions that are subject to the extended power rationing remain the same as those that were targeted in the Notice issued on August 15, which covers 19 cities (prefectures), including Chengdu, Zigong, Luzhou, Deyang, Mianyang, Guangyuan, Suining, Neijiang, Leshan, Nanchong , Meishan City, Yibin, Guang'an, Dazhou, Ya'an, Bazhong, Ziyang, Aba Tibetan and Qiang Autonomous Prefecture, and Ganzi Tibetan Autonomous Prefecture.  

SMM survey found that the impact of this round of power rationing in Sichuan on lithium salt, ternary cathode material, lithium iron phosphate, and graphitization enterprises has expanded. Most enterprises have officially been shut down from 0:00 on August 15. Due to the prolonged period of power outage, the furnaces of ternary cathode material and lithium iron phosphate production lines were cooled down. Once the power rationing is ended, it will take some time for the furnaces to be heated before the production can resume. Therefore, the actual impact on the production is longer than the duration of power rationing. Some producers said that this round of power rationing will actually affect their production for nearly half a month.

According to SMM’s latest estimate, this round of power rationing will lead to an output reduction of 1,250 mt of lithium carbonate, 3,050 mt of lithium hydroxide, 2,500 mt of ternary cathode materials, 9,750 mt of lithium iron phosphate, and 3,180 mt of graphitization in August. The power rationing will have bigger impact on lithium salt demand than on its supply. Should the power shortages in other regions intensify amid extremely hot weather, more regions may resort to power rationing policy. Lithium carbonate supply tightness is expected to ease. Ternary cathode material and LFP enterprises will slightly slow down their raw material stockpiling in the second half of the year.  

SMM will continue to keep a close eye on how the power rationing will evolve and its impact.