As Purchase Manager, I am often asked what we can expect in the coming period. Slowly but surely the picture becomes clear. I would like to take you with me in my thoughts.
As long as supply and demand are somewhat in balance and the price of raw materials remains more or less stable; the price per Watt peak should fall steadily due to the ever-increasing efficiency of panels. After all, panel costs are the sum of the materials and production overhead. When costs remain the same but the conversion efficiency increases, the result is higher Watt peak power. So, the unit price per Watt peak will automatically fall.
In July and again in August, my colleague Frank Heijckmann highlighted a number of factors that could influence module availability and pricing. In particular, the rising demand from the Chinese market with the rising price of silicon and wafers in Q3 eventually led to an increased module price. The question now is what should we expect in the first half of 2021? What is happening at the moment that could affect prices and availability in the next two quarters?
We see something quite special on the demand side. Many projects all over the world have been postponed due to COVID-19. These cancellations were the main reason for the panel oversupply and sharp fall in prices during Q2 2020. These projects should be built soon. We expect a large portion of them to build out in the first half of next year. In addition, a large portfolio of Chinese Grid-Parity projects were postponed due to increased module prices in Q4 2020. These projects need to be completed in 2021.
The top Tier-1 manufacturers have significantly increased their production capacity. JinkoSolar, Trina Solar and Longi Solar have said they will rapidly expand to more than 30GW annually. However, the raw material supply companies (i.e. glass, EVA, backsheet, silver & aluminum paste) have not scaled up enough to match the module manufacturers production capacity. As a result, glass prices have increased by 55% in the past 3 months alone and EVA prices are up 6%. The prices of silver and aluminum paste have also risen sharply.
If that wasn’t enough, the shortage of glass has brought some production lines to a standstill. There are several studies claiming module demand in Q4 is around 36GW; but the module supply is stuck at around 26GW. There is little doubt that the shortage of glass is the main reason for the supply bottleneck. I cannot say the figures are 100% correct, but the conclusion is clear: despite the production capacity increases, actual module production is lagging behind demand and costs of raw materials have increased.
What to do? Many of the major Tier-1 manufacturer production slots are already sold out in Q1 2021. Ordering now likely means delivery in April / May 2021. We even see this moving by the day, further and further into Q2 2021. So do not expect that large projects for Q2 can still be ordered in the beginning of 2021.
Module availability will almost certainly be an issue in the first part of 2021. Also, many distributors in Europe do not dare to take large positions because of price volatility. In summary: it will be an exciting winter.
Head of Procurement PVO International