Blog: Frank Heijckmann (follow-up)

Uncertain times….what can we expect?

 

Last month I wrote about the probability of a solar panel price increase during Q3 and Q4. There were more and more signs that something was about to happen, the only questions were when and how big the impact would be.

Now the answer is more clear. Silicon prices have risen sharply, causing wafers to rise in price. As a result, cell prices have risen, causing the price of panels to rise sharply. Unfortunately that’s not the only thing. We see that many solar panel manufacturers are sold out for this year and therefore there is pressure on availability. So partly due to external factors (explosion at GCL factory and floods at the Tongwei factory) prices are rising and then on top of that comes the increasing world demand, which has created an explosive cocktail.

You might think there’s a plan behind it, because this kind of bad luck is a bit of a coincidence. However I am not a conspiracy thinker, so let’s stick to the facts. Prices likely are going to rise for a while and availability is tighter. How could this develop in the coming months? I see two possible scenarios:

 

Scenario 1

It is expected that Tongwei has its silicon plant up and running again in a few weeks and GCL’s plant should be fully operational again from mid-September. After this, it is expected that the price of silicon starts to fall. However, it takes about 3 months for silicon to be processed from wafer to cell and then to module. So a drop in silicon prices today is seen in the module price after a few months. In other words, if I am right that the price of silicon begins to fall from mid-September, we start to benefit from this beginning with January deliveries.

 

Scenario 2

A second scenario is that from November this year there could be some extra availability (although at higher prices). This has to do with us seeing cancellations of contracts between solar manufacturers and Chinese developers (often large scale utility projects). Manufacturers must raise their prices in spite of contracts made, because of the rising cell prices. In some cases, the Chinese developers can bear this increase, but in other cases they cannot. The question is what will happen to the production slots if the developers cancel? Selling for higher prices in Europe could be a trade-off. This could bring some extra capacity into Rotterdam. Of course the price should certainly be higher than today.

 

In both scenarios, prices likely will not fall for the time being and there should be a tightening to a greater or lesser extent. The question is will we go back to the price level of June this year? My cautious forecast is that this cannot happen until March 2021 at the earliest. Only from the production after Chinese New Year (February 2021) do I see the potential for prices falling back to the old level. Of course March is still a long way off. Predicting what will happen in six months is accompanied by a high degree of uncertainty. In any case, let us make sure we are as prepared as possible!

 

Frank Heijckmann

Founder PVO International