Benchmark Minerals reports that China’s ongoing energy shortage, which has seen local governments enforce intermittent power cuts since July 2021, has begun to affect domestic anode and cathode production as several producers were forced to scale back production in late Q3.
Hunan and Inner Mongolia are among the most affected areas of the battery supply chain, with the former a production hub for cathodes and the latter a hub for synthetic graphite anode processing. Restrictions in Inner Mongolia have exacerbated graphitization capacity constraints, which began in early 2021, driving up synthetic anode production costs.
China’s trade war with Australia, which has coincided with industrial expansions this year, has led to a coal shortage, which fuels much of China’s electricity supply. During China’s National Energy Commission meeting in mid-October, Premier Keqiang Li emphasised that extreme electricity cuts need to be corrected to ensure that the northern regions have secure usage of electricity for the winter, signifying that electricity restrictions within China might be relaxed at some stage in Q4, Benchmark said.
In the long-term, China seeks to guarantee resource security by addressing the structural issues behind the current electricity supply shortage. The government is pushing for an upgrade in coal-powered electricity infrastructure, diversification of energy sources, and mass adoption of energy storage technologies.