Metals: Record High Temperatures in Sichuan Pose Output Cut Risks

Metals: Record high temperatures in Sichuan risk output cuts

Record high temperatures in China’s Sichuan province have raised the chances of electricity supply curbs for metal producers over the coming days. Power consumption in Sichuan, a region already struggling with low hydro levels, reached a record high on Monday. According to the National Bureau of Statistics (NBS), hydro generation across China fell about 33% YoY in May. Shanghai Metals Market (SMM) reported that aluminium smelters near the provincial capital of Chengdu have been ordered to reduce their power consumption, which might result in 50kt of annualised capacity of the metal being idled. Sichuan is home to roughly 1mt of China’s total aluminium capacity of over 40mt. However, the planned resumption of about 1mt of aluminium capacity in the Yunnan province by next month could help offset these supply risks.  

In terms of mine supply, Peru’s latest official numbers show that domestic copper output rose almost 35% YoY (+5.8% MoM) to 234.8kt in May. Cumulative production over the first five months of the year increased by 19.4% YoY to 1.07mt. Meanwhile, zinc output declined 8.2% YoY to 126.9kt in May.

The latest SMM survey shows that China’s copper cathode production fell 4.3% MoM to 918kt in June, as around nine smelters undertook maintenance resulting in a total output impact of about 50kt. However, copper output still grew 7.1% YoY, whilst cumulative production also rose by 11% YoY to 5.6mt in the first half of the year. Chinese primary aluminium production remained almost flat on an annual basis at 3.4mt in June, although cumulative output rose 2.8% YoY to 20.1mt. Meanwhile, refined zinc output fell 13% YoY to 525.5kt, while lead output rose 24.6% YoY to 293kt last month.