Risk Center

China faces new lockdowns as hottest summer on record eases

As China continues to battle its warmest summer in more than 60 years, authorities in August have been forced to extend power restrictions multiple times in the southwestern Sichuan province and Chongqing, China’s largest municipality. Initial restrictions were announced from August 15 until August 20, which then extended until August 25 for Chongqing and even further until August 29 for Sichuan.

Companies in the affected areas faced difficulties with planning due to ad-hoc announcements by authorities and the lack of firm deadlines for restrictions to be lifted.

While energy supply has normalized since the start of this week, allowing manufacturers to gradually restart operations following a 10–14-day shutdown, the region is now facing a new threat due to the resurgence of COVID-19 cases that have prompted Chengdu, one of China’s largest cities, to announce a new lockdown from the evening of September 1 on its more than 20 million residents.

Even as the extreme heat has subsided, the new COVID-19 lockdown will add complications for companies in the affected area to restore full production capacity.

Industrial production resumes following easing of restrictions

Most energy restrictions ended by August 29, and numerous affected companies across Sichuan and Chongqing gradually resumed production at their affected sites. Sichuan and Chongqing are home to a multitude of companies from industry sectors including automotive, aerospace, electronics, semiconductors, telecommunications, petrochemicals, and agro-chemicals

The impact of the heatwave and associated power crunch on manufacturing activity has been significant, topped only by citywide COVID-19 lockdowns in the southern technology hub of Shenzhen and Shanghai earlier this year. Everstream Analytics’ data of factory shutdowns indicates that most manufacturers in the affected areas resumed operations as energy restrictions gradually eased in the past few days.

Impact on logistics likely to last as shipping on Yangtze River disrupted

The continuously high temperatures also caused a reduction in water levels across southwestern China, with over 60 rivers reportedly dried up around Chongqing. Critically, the Yangtze River closed at points along the lower and middle section due to low water levels. The water level dropped to 17.4 meters at the monitoring spot in Hankou, six meters lower than recent averages for this time of year, and shipping has been impacted as a result.

The Yangtze River is a key inland waterway and route to the Port of Shanghai where goods are transshipped for exports to North America, Southeast Asia, and Europe, so the impacts will likely be felt both across China and abroad.

Temperatures to decrease in coming weeks; heatwave trend likely to continue

Looking ahead, temperatures across China will be in a period of moderation during the first few weeks of September. Rather than the extreme heat of the past three months, temperatures will average out to be close to usual levels. This is likely to ease the stress on power networks that the summer heat has caused across the country.

Nevertheless, this summer has been one of the hottest in history in China. This year, temperatures across the country averaged out to be between 1 and 1.5 degrees Celsius above the country’s 10-year normal. China has faced increased temperatures over the past seven years. The trend of increased heat is likely to continue, with similar disruptions likely to occur in the coming years.

Everstream clients are receiving more detailed insights and recommendations about this risk.

Contact us to learn how we can give you a complete view of the risks affecting your end-to-end supply chain and what you can do to mitigate them.

[URL] https://www.everstream.ai/company/contact-us/

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