Summary of Key Points
The persistent heatwaves in Europe have not only made air conditioning units extremely scarce for civilian use but have also caused a systemic impact on all aspects of the supply chain, creating a negative cycle: “high temperatures → labor shortages/equipment failures/logistics disruptions → decreased supply chain efficiency → rising costs → economic losses.” Meanwhile, Chinese companies have seized this opportunity to shift from merely exporting air conditioners to providing industrial and commercial temperature control solutions. They have also deepened cooperation with Europe in areas such as green energy and joint industrial chain development, upgrading their role from mere product sellers to partners in building integrated ecosystems.
1. High temperatures trigger a negative supply chain cycle, with multiple links being affected
The impact of high temperatures on the European supply chain is not isolated; it spreads like dominoes:
- Labor: The heatwave has led to an increase in illnesses and a shortage of workers in factories. Interestingly, some employees in France prefer to go to work rather than stay at home because offices are equipped with air conditioning, while households cannot afford to install it (due to high installation costs and old building regulations).
- Equipment and energy: Excessive heat prevents machines from functioning properly. Some substations in France have shut down due to overheating, causing power grid overloads and industrial power outages, forcing factories to stop production.
- Logistics: The water levels in rivers like the Rhine have dropped, limiting the capacity of barges and driving up freight costs. Asphalt on roads has melted, increasing the failure rate of older vehicles and slowing down transportation.
- Production: Chemical companies are facing significant challenges: there is a shortage of cooling water (high river temperatures and restricted water access), resulting in the suspension of TDI production at BASF’s largest global facility (a key ingredient for polyurethane). Factories must spend extra money on equipment repairs and infrastructure improvements, further increasing costs.
These issues are interconnected: fewer workers lead to logistical bottlenecks, preventing the delivery of parts, which in turn results in reduced production and higher per-unit costs, creating a self-reinforcing negative cycle.
2. High temperatures cool Europe’s economy, with potential GDP losses exceeding $600 billion over the next few years
Supply chain disruptions inevitably affect the economy. According to an Allianz Trade report, if extreme heat continues from 2026 to 2030, the GDP of major European economies such as France, Germany, Italy, and Spain could decline by 5%-7%, totaling a loss of $638 billion—equivalent to billions in annual earnings for each country.
3. Chinese companies offer more than just air conditioners; they provide cooling solutions
In response to Europe’s need for cooling solutions, Chinese companies are addressing the underlying issues:
- Industrial/commercial temperature control: Midea has long been involved in B2B services, providing integrated systems for hotels and office buildings that include cooling, heating, and hot water, as well as customized cooling solutions for factories to prevent equipment failures and reduce production losses.
- Logistics contingency: Cainiao (Alibaba’s logistics division) has opened 28 overseas warehouses in Europe to increase delivery capacity. JD.com has stocked mobile air conditioners and fans in local warehouses, ensuring that orders are delivered the next day and has dispatched additional delivery personnel to meet increased demand.
- Building materials: A company from Shanghai is looking for opportunities to collaborate on insulating materials that can reduce temperatures and is already making early market preparations.
4. The Sino-European industrial chain is evolving from simple trade to collaborative ecosystems, with closer green energy cooperation
The heatwave has accelerated Europe’s transition towards renewable energy, leading to more integrated cooperation between China and Europe:
- Photovoltaic and energy storage collaboration: At the Munich Energy Exhibition in June, China and Europe signed agreements for over 2.65 GW of photovoltaic projects and 87.74 GWh of energy storage capacity. Trina Solar and European institutions jointly established an energy storage fund worth €1 billion, with the EU setting a goal to add 45 GWh of storage capacity within three years. Chinese photovoltaic and energy storage technologies are now integrated into Europe’s energy infrastructure, going beyond mere product sales.
- Joint industrial chain development: Xiamen Tungsten New Energy and French companies have jointly built a battery cathode material factory in Dunkirk, with an investment of nearly €500 million, capable of supplying 500,000 electric vehicles. This marks the first joint project in the new energy materials industry between China and France.
5. European consumers are snapping up cooling products; even regions near the Arctic Circle are in demand
High temperatures have sparked a surge in consumer demand:
- Air conditioner and fan orders have increased significantly in southwestern Europe, including France.
- In Sweden, located near the Arctic Circle, sales of fans on Alibaba’s international platform have risen by 375% as people prepare for the heatwave.
- JD.com anticipated the high demand and stocked products in local warehouses in Europe to ensure fast delivery.
In summary, the heatwave in Europe presents both a crisis and an opportunity: it poses challenges to Europe’s supply chain and economy but also provides Chinese companies with a platform to showcase their solution capabilities and deepen cooperation with Europe.