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China's Chongqing extends power curbs as drought drags on

·3 min read
An aerial view shows the Yangtze river that is approaching record-low water levels during a regional drought in Chongqing

BEIJING (Reuters) -The sprawling Chinese region of Chongqing, home to several large global automakers, extended power curbs at factories as a record heatwave and drought continue to wreak economic and environmental damage throughout the country's southwest.

Industrial firms were originally ordered to restrict output from Aug. 17 until Aug. 24, but formal curbs were extended through Thursday and will be gradually relaxed "in an orderly manner" once weather conditions have improved, according to a notice issued by Chongqing authorities on Wednesday.

Drought has devastated power generation in the Yangtze river basin, with hydropower accounting for around 80% of the electricity in neighbouring Sichuan province. Dwindling water levels have left generators operating well below their normal capacity.

Pangang Group Vanadium & Titanium Resources Co Ltd told the stock exchange in a filing on Wednesday its Chongqing subsidiary had received the notice and would continue to suspend production.

"The specific recovery time will be subject to the notification of relevant departments in Chongqing," it said.

Honda Motor Corp also said on Thursday its power product factory in Chongqing will remain closed this week.

"We don't know what to do until we see what the government tells us for next week," a spokesperson said.

The plant makes small-engine products like lawnmowers and tillers and doesn't manufacture automobiles. Honda made 23% of all of its power equipment in Chongqing last financial year.

The factory was on summer vacation until this past Sunday and suspended operations from Monday.

Chongqing and other parts of the Yangtze basin have been broiling under weeks of temperatures in excess of 40 Celsius (104 Fahrenheit), causing crop damage and forest fires.

Power rationing has impacted firms in sectors like battery making and solar manufacturing. Toyota Motor said it had used an in-house generator at its Sichuan plant to resume operations.

Although national forecasters reduced their heat alert level from "red" to "orange" from Tuesday, temperatures are still expected to exceed 40C until the weekend in some parts of the Yangtze delta.

Sichuan province normally delivers large amounts of its surplus hydropower to other provinces, and coal-fired power plants in Anhui province and elsewhere have been under pressure to pick up the slack, according to state media.

"It's unclear how long this power will continue to be exported ex-province, considering the severity of the local power shortage, but cross-province transmission is usually given highest priority in China's power dispatch planning," said David Fishman, a power expert with the Lantau Group consultancy.

"If these exports are suspended, already-tight power supply in eastern China, which is enduring its own heat wave, will be further affected," he said in a research note.

China's State Grid Corporation is now delivering 130 million kilowatt-hours of power per day to Sichuan, state broadcaster CCTV said on Wednesday.

Economists at ANZ said in a note on Tuesday it was unlikely China would see a repeat of last year's nationwide energy shortages, which were caused by tight coal supplies, adding that the impact of the current power crunch on gross domestic product was "negligible" so far.

(Reporting by Beijing newsroom, David Stanway in Shanghai and Satoshi Sugiyama in Tokyo; Editing by Lincoln Feast, Tom Hogue, Kirsten Donovan)