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 Aug. 15. On August 15, the Sichuan Provincial Department of Economy and Information Technology and the State Grid Sichuan Electric Power Company jointly released the Emergency Notice on Expanding Scope of Cutting Electricity Supply of Industrial Enterprises in Favor of Residents. According to the notice, starting from August 15, the staggered use of electricity will be canceled and the scope of the implementation of the cut off of electricity to industrial enterprises in favor of residents will be extended to 19 cities (prefectures ) of the province (except Panzhihua and Liangshan Prefecture). All industrial electricity users who are included in the Sichuan Power Grid Energy Orderly Utilization Program (including whitelisted key companies) must stop production (except for security reasons). This will take effect from 00:00 a.m. on August 15, 2022 to 24:00 a.m. 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 power rationing from 00:00 on August 20, 2022 to 24:00 on August 25, 2022.

Regions subject to the extensive electricity rationing remain the same as those 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 and Qiang Tibetan Autonomous Prefecture and Ganzi Tibetan Autonomous Prefecture.

The SMM survey found that the impact of this electricity rationing cycle in Sichuan on lithium salt, ternary cathode material, lithium iron phosphate and graphitization enterprises has widened. Most businesses were officially closed from midnight on August 15. Due to the long period of power outage, the ternary cathode furnaces and lithium iron phosphate production lines were cooled down. Once power rationing ends, it will take some time for the furnaces to heat up before production can resume. Therefore, the real impact on production is longer than the duration of power rationing. Some producers have said that this cycle of electricity rationing will actually affect their production for almost half a month.

According to SMM’s latest estimate, this energy rationing cycle will result in reduced production 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. Energy rationing will have a greater impact on the demand for lithium salt than on its supply. If electricity shortages in other regions intensify in an extremely hot climate, more regions could resort to an electricity rationing policy. The tightness of lithium carbonate supply is expected to ease. Ternary cathode materials and LFP companies will slow down their stockpiling of raw materials slightly in the second half of the year.

SMM will continue to closely monitor the evolution of power rationing and its impact.