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Increase in transport and metal prices in the solar business

Increase in transport and metal prices in the solar business

Components
Freefields

01.03.2023

The COVID-19 pandemic has undoubtedly affected most businesses around the world. Some of them in a negative way (e.g. hospitality and tourism industry, airlines, etc.) and some of them have taken off tremendously after an initial hiccup in the spring of 2020. The technology sector, of which we are a part, is definitely in the latter group.

Governments began printing cash as part of a programme to stimulate the economy and, as a result, the excess money in the market forced people and companies to spend more, which in turn increased demand for transport and resources. However, the supply side was just recovering from the lockdown and had not allocated sufficient capacity for the coming demand storm.

The combination of the supply-side shortage and the demand-side explosion led to a huge increase in shipping costs, especially in container shipping, which multiplied the prices from the previous spring. The same applies to the metals industry. Copper prices broke decade-old records, while aluminium and steel followed a similar pattern. The biggest contributor to this situation was China's rebound after the COVID-19 outbreak.

Since renewables rely heavily on these inputs, the cost of solar farms has risen accordingly. Solar modules and inverters are mostly shipped from China on container ships, aluminum is used in AC cables and mounting systems, copper as a great conductor is used for DC cabling or transformer windings, and the supporting structures are made of steel.

The whole situation has greatly complicated any predictions in the solar field, as component prices calculated two weeks ago were no longer valid and manufacturers are reflecting roller coaster-like behavior in the validity of the offer, which in some cases reaches only a few days. This is, of course, a nightmare for anyone responsible for budget planning. Experts predict that prices will settle after a while, and some companies are counting on this and moving projects into next year. But no one can say when the settlement will happen and what the new price level will be.

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