Tightness in the Chinese power market could mean lower output of aluminum and nickel pig-iron, plus deceleration in steel production and a probable increase in thermal-coal imports, says Deutsche Bank. More than 10 provinces started rationing electricity in energy-intensive manufacturing sectors in April.

"While the power situation in China has not been characterized as a crisis yet, in our view there is a risk that a serious squeeze in power availability could eventuate over the next two to three months," Deutsche Bank says.

The bank cites power-demand growth, "elusive" profitability for independent power producers due to regulation of power tariffs at a time of rising input costs, drought conditions affecting hydro power, plus infrastructure bottlenecks such as the transport of coal.

"We believe aluminum production in Henan, Jiangsu and Hunan provinces are at risk for potential production cuts," says Deutsche Bank, adding these provinces account for over a quarter of total Chinese production."

In steel, we believe potential disruption could come from Jiangsu, Henan, Hunan and Jiangxi provinces, which represent around 30% of national output."

Nickel pig iron could also be affected, meaning China's power shortage could limit downside risks for nickel, which has underperformed other industrial metals lately, the bank adds." Production cuts in the low-cost substitute for refined nickel could boost nickel demand and support prices."