L R AS Published on Monday 25 October 2021 - n° 379 - Categories:the prices
Major future price increases according to pvXchange
Significant future price increases
Panel prices will continue to rise, driven by global inflation. All panel categories are affected. Only the variations recorded at the beginning of October
are derisory compared to the price increases still to come. A few days ago, some manufacturers had already announced much larger upward corrections for future deliveries. The price increases will be at least 15% to 20% compared to the price levels that prevailed only a few weeks ago, towards the end of the third quarter. However, this is probably the last price correction we can expect at the manufacturer level until the end of the year.
The statement by the five largest manufacturers that they are citing force majeure, i.e. external circumstances beyond their control, such as government regulations or natural disasters. This was probably done as a precautionary measure to justify and pave the way for gradual adjustments to existing supply contracts. While this will help plant builders or distributors, in most cases commitments have been made to these downstream stakeholders that cannot simply be removed.
Recalculation and renegotiation with the customer is not always possible or reasonable. But how long can plant builders wait and expect the market to improve?
Dealing with price increases
All five manufacturers point to the energy shortage, which is expected to result in production cuts of up to 90%. The additional misfortune of unavailable or unaffordable raw materials could soon lead to a complete shutdown of production, which would put additional pressure on the overall capacity still available.
The laws of the market apply immediately. Only those who are willing to pay more will still be supplied, while those who are not, will be left out. In addition, global shipping prices are still high. This problem is not about to be solved, on the contrary. The current shortage of lorry drivers in the UK and elsewhere is making the situation worse. Empty containers and a significant number of containers are stored in temporary storage facilities. They cannot be unloaded or put back into circulation, so they are removed from the international supply chain.
Chinese manufacturers do not want to find themselves in a situation similar to that which they experienced at the turn of the year 2020/2021, when there was an unexpected increase in raw material prices and a shortage of capacity.This autumn, all the contracts signed by the European Union have been terminated and all the contracts signed by the European Commission have been terminated. This autumn, all contracts signed before March or April 2021 will have to be reviewed. The challenge will be whether and how an amicable solution can be found between all parties involved. The customers who ordered small and medium volumes will be the most sacrificed. They can expect to lose more or less important delivery volume commitments if they had negotiated conditions at the beginning of the year that are no longer interesting for the supplier in the current economic situation. Large, strategically important customers will probably be spared for the time being.
Two options for affected buyers
The installer or builder should talk to the customer again and determine whether a price adjustment is possible for the current project. Of course, the financing bank and the investor must also be involved in the discussion so as not to jeopardise the release of funds. Sometimes there is still some margin in the budget that can be exploited without crushing profitability or sacrificing the company's own income.
The second option is to wait for prices to fall again. It requires a certain gambler's mentality. It is certain that at the end of the fourth quarter there will again be a batch of panels available, which will be offered on the market at special prices. But the question is whether it is suitable for the project in question and whether the interested party is quick enough to seize the opportunity. Unfortunately, a steady decline in crystalline panel prices is not in sight in the near future.
pvXchange of 21 October 2021
Editor's note What is impressive about this text is the purely economic attitude of the situation proposed by pvXchange. It is all about economics, with no other perspective than that. On the one hand, it does not take into account the central government's desire to limit energy expenditure in its country, which for example limits electricity consumption in Yunnan, which will force a 90% reduction in silicon production in this province. If we add the American desire not to buy products from Xinjiang (40% of Chinese production), there is almost no silicon available (only 40%). On the other hand, it does not take into account the geopolitical situation of the China/US conflict. It neglects the Chinese desire to become the most powerful country on the planet within a reasonable timeframe. It does not analyse how the government is taking advantage of the hegemony in PV to achieve its ends in a business of the future.
Photovoltaics is not a product like any other. It is the means to achieve improved competitiveness with hydrocarbons; it is the energy of the 21st century