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Shipping costs remain key challenge for solar sector

Shipping costs remain key challenge for solar sector

The solar industry will face elevated shipping costs and supply disruptions for at least another year until the global ocean freight system starts to normalize.

New figures from Dutch financial services provider Rabobank shows that ocean container shipping costs have fallen from a record-breaking high in September 2021. However, they are still up to five times higher than in 2019 and the banking group has warned that it does not see a return to pre-pandemic lows on the horizon.

Driven by pandemic-related disruptions, international container freight rates have increased dramatically since January 2019, reaching a record price of nearly $10,400 in September 2021. In June 2022, the global freight rate index stood at almost $7,100.

The higher freight costs and supply-chain disruptions are affecting all industries, but solar PV is one of the most effected due to the high concentration of solar panel manufacturing in China. The elevated freight costs and shipping constraints are also affecting other system components like trackers, inverters, and batteries.

Rabobank says in its “Global Ocean Freight Outlook” that container freight prices will continue to gradually decline over the next 12 months from the “irrational” highs reached late last year. However, it said it does not expect them to return to pre-pandemic lows.

Viet Nguyen, a RaboResearch global supply chain analyst, said that shipping container prices were “never” expected to return to the low pre-pandemic rates of approximately $3,000 per container. However, Nguyen predicted they would decline from the current level of $7,000 to $78,000 per container mark in the year ahead.

Nguyen said several global “macro drivers” are influencing shipping dynamics. While heightened inflation and all-time low global consumer confidence levels are exerting downward pressure on ocean rates, Nguyen said rates are being supported at higher levels by imbalanced global trade flows, which hinder a cost-effective repositioning of empty containers.

“Added to this, geographical uncertainties are adding risks and there are also growing operational costs for the sector from higher energy costs and sustainability regulations,” he said.

While shipping rates are forecast to soften, Rabobank expects schedule reliability for containers to also recover, albeit slowly. Port congestion, a major contributor to the continuing supply disruptions, is forecast to remain at key ports until the first half of next year.

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