Mahindra Susten to Develop 150 MW Open Access Renewable Power Project

BJP, Congress Bet Big on Renewables in 2024 Election Manifestos

Daily News Wrap-Up: REIL Invites Bids for 200,000 Mono PERC Solar Cells

Solar, Storage, Wind Drive 95% of US Interconnection Queues as Backlog Rises

Ahasolar Wins Consultancy Contract for 52 MW Solar Project from BPCL

REIL Invites Bids for 200,000 Mono PERC Solar Cells

Daily News Wrap-Up: MNRE Adds 4.1 GW of New Solar Module Capacity to ALMM

MNRE Adds 4.1 GW of New Solar Module Capacity to ALMM

AutoNxt Secures Pre-Series A Funding to Finance Electric Tractor Launch

Daily News Wrap-Up: REC Records Highest-Ever Loan Approvals in FY24

<p>The Indian solar developers and engineering, procurement, and construction (EPC) service providers have been hit hard by the increase in freight charges and the shortage of raw materials that have pushed the prices up for projects and scrambled timelines.</p>
<p>With the second wave of the Covid-19 pandemic ravaging the country, it is becoming increasingly difficult for developers to complete the projects on time, and as things stand, it will take some time before normalcy returns.</p>
<p>In the calendar year 2020, India <a href="https://mercomindia.com/solar-imports-2020-down-78/" target="_blank" rel="noopener">imported</a> solar cells and modules worth $475.78 million (~₹34.7 billion), a 78% drop from CY 2019. A drop in demand due to the overall impact of the Covid-19 pandemic and the subsequent lockdown resulted in the import figures going down.</p>
<p>The freight charges saw an upward trend a year back with the outbreak of the Covid-19 pandemic. Since then, its trajectory has been on an ascending curve, adversely impacting the import of solar modules to India.</p>
<p>Speaking on the prevailing situation, Sandeep Shivhare, Senior Executive-Marketing at <a href="https://kpcl.com/" target="_blank" rel="noopener">Krishnapatnam Port</a>, said, “This current trend of freight charges hike caught up as the Covid-19 pandemic gathered momentum in 2020. Before the virus hit the Indian shores, the shipping companies had cutthroat competition, and the rates were very competitive, hovering in the range of $500 (~₹37,030)-$600 (~₹44,436) per 40-feet high cube (HC) container. Now, the charges have spiked up to nearly $3,000 (~₹222,182)-$3,500 (~₹259,212) per container.”</p>
<p>Pointing out another crucial reason behind the price rise, Shivhare added that the freight prices for importing modules have significantly increased because of a shortage of containers.</p>
<p>“Currently, there is a shortage of containers worldwide. Around 85-90% of container manufacturing capacity is with China, and India has only 2% of the capacity, with a single facility in Faridabad. As the number of containers at our disposal started going down, the prices skyrocketed. Overall, the supply chain has been disrupted. The shipping companies have artificially increased the rates. Since we have been caught in the middle of a virulent second wave of the pandemic, I don’t see the charges going down in the next six to seven months. Although the module prices have not increased to the same extent as freight charges hike. In Telangana, many developers have delayed their projects by two to three months and are waiting for the charges to drop,” Shivhare informed.</p>
<p style="text-align: center;"><a href="https://mercomindia.com/wp-content/uploads/2021/05/FREIGHT-Charges-10.png"><img decoding="async" loading="lazy" class="alignnone wp-image-26407 size-full" src="https://mercomindia.com/wp-content/uploads/2021/05/FREIGHT-Charges-10.png" alt="FREIGHT Charges-10" width="530" height="254" srcset="https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2021/05/FREIGHT-Charges-10.png 530w, https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2021/05/FREIGHT-Charges-10-300x144.png 300w" sizes="(max-width: 530px) 100vw, 530px" /></a></p>
<p>Commenting on the issue and the effect of Covid-19 on the solar supply chain, Mohit Shrimal from <a href="https://en.longi-solar.com/" target="_blank" rel="noopener">LONGi Solar</a> noted, “The developers are given an option to go for free on board (FOB), or cost, insurance, and freight (CIF), and shipping rates are publicly available so that they can check them. It wouldn’t be right to say that it has affected the module prices, but the shipping rates have definitely gone up. It has increased by nearly three to five times, and the landed cost of modules has gone up because of the increase in the shipping cost. We are not sure how long it will take for the freight charges to come down. Our estimation says it will take nearly six to seven months before normalcy returns.”</p>
<p>While many believe that the increase in freight charges will not affect the overall cost of the modules, the rise in prices has certainly affected the solar supply chain. But under the current developments, many developers have postponed their purchases and are waiting for the prices to come down.</p>
<p>Speaking to Mercom, an executive at a leading solar developer said, “The freight charges are on the higher side. It has gone up four to five times. The increase in charges started in 2020 when the first wave of Covid-19 hit. Basically, the containers were not getting cleared from the ports in the United States and the United Kingdom. The impact is an increase of nearly a cent for the modules, and the price of the container right now is somewhere around $3,000 (~₹222,182)-$3,500 (~₹259,212) per 40-feet container. Earlier, it was nearly $1500 (~₹111,091)-$1700 (~₹125,903) per 40-feet container, which was already an increase from the pre-Covid-19 prices of $600-$700 per container. The industry trends hint that the charges will continue to remain steep for another six to seven months.”</p>
<p>With experts predicting an impending third wave even as the ongoing health crisis continues to wreak havoc, the solar industry remains concerned about its impact on the supply chain. It is feared that if the freight charges continue to soar unchecked, the overall cost of the ongoing projects will shoot up.</p>
<p>“With the Covid-19 pandemic raising its head again in the country, the trend is bound to continue for some more time. I’m not sure how long it will take for things to come under control, but it has definitely affected the import of modules and the module prices,” the official with the solar developer added.</p>
<p>Putting things into perspective, a top executive with one of the leading module suppliers explained, “The sea freight that used to be in the range of $800-$1000 per 40-feet HC containers in Q1 2020, is now in the range of $3,000 (~₹222,182)-$3,200 (~₹236,994) per 40-feet HC container. There is an increase of almost 275%. It now costs an additional ~₹162,000 per container in sea freight. So, even if it’s a small project of 1 MW that generally consists of around 4&#215;40 HC containers, this increase in sea freight costs hit the buyer by ₹648,000 (~$8,733) more. So, you can very well imagine how much the costs would overshoot for projects with around 100 MW capacity.”</p>
<p>“Initially, the sea freight cost was around 1.7% of the cost of modules, but now it costs around 5.4%, and this difference is huge. This increase in sea freight is around 1.33 cents per watt. Many smaller developers cannot absorb this increase in cost, and even for bigger developers, this increase is too high and eating into their margins. It has also changed the tendency of selling terms from cost, insurance, and freight (CIF) to the free on board (FOB) or at actuals for bigger buyers. Shipping lines also ask for a guarantee sum from the booking party for confirmed space, which is a risk for the latter, as there are chances of losing substantial money if there is a delay in shipping or dispatching the modules from the load port. It’s making the supply chain process and managing cost more challenging,” he said.</p>
<p>While many believe that the increase in freight has led to the increase in module prices, the executive noted that the contribution of the overall increase of logistics, including sea freight, accounted for nearly 23% of the increase in module prices in April 2021 compared to July 2020.</p>
<p>Speaking on the future trends, he opined, “We have already seen the rates touching $3,600 (~₹266,618)-$3,700 (~₹274,025) per 40-feet HC container in January this year. But now, the rates have stabilized around $3,000 (~₹222,182)-$3,200 (~₹236,994) per container for China-India major seaports. But the second wave of the pandemic has hit India badly. As a result, another round of imbalance of containers could be unleashed. Hence, an increase in sea freights can’t be ruled out. All we can do is wait and watch to see which direction the trend takes.”</p>
<p>While 2021 was expected by many to be a breakthrough year for the Indian solar industry, things have again started to slow down because of the second wave of the pandemic. This, coupled with the increase in freight charges, is likely to impact import components to the country and affect the ongoing projects.</p>
<p>“Freight charges are high all over the world, and shortage of shipping containers is also widespread. Macroeconomic policies and spending patterns influenced by Covid-19 in the US and Europe are big drivers behind these trends. There is so much uncertainty in the markets right now that it makes sense to model higher freight charges for the next 6-12 months when bidding for projects,” said Raj Prabhu, CEO of Mercom Capital Group.</p>
<div class="saboxplugin-wrap" itemtype="http://schema.org/Person" itemscope itemprop="author"><div class="saboxplugin-tab"><div class="saboxplugin-gravatar"></div><div class="saboxplugin-authorname"><a href="https://cms.mercomindia.com/author/rakesh-ranjan-parashar/" class="vcard author" rel="author"><span class="fn">Rakesh Ranjan</span></a></div><div class="saboxplugin-desc"><div itemprop="description"><div class="designboxt">
<p><img class="alignleft" style="border-radius: 50%;height: 50px;margin-top: -4px;border: 1px solid #00b451" src="https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2022/02/Rakesh-Headshot-crop-2.jpg" width="50" /></p>
<p><strong style="text-decoration: underline">Rakesh Ranjan,</strong> Staff reporter at Mercom India<br />
<a href="https://mercomindia.com/author/rakesh-ranjan-parashar/" target="_blank" rel="noopener">More articles from Rakesh Ranjan.</a></p>
</div>
<div class="authorboxn">
<p><img class="alignleft" src="https://mercomindia.s3.ap-south-1.amazonaws.com/wp-content/uploads/2022/02/Rakesh-Headshot-crop-2.jpg" width="77" height="102" /><a href="https://mercomindia.com/author/rakesh-ranjan-parashar/" target="_blank" rel="noopener"><strong style="color: #00b451">Rakesh Ranjan</strong></a> is a staff reporter at Mercom India. Prior to joining Mercom, he worked in many roles as a business correspondent, assistant editor, senior content writer, and sub-editor with bcfocus.com, CIOReview/Silicon India, Verbinden Communication, and Bangalore Bias. Rakesh holds a Bachelor’s degree in English from Indira Gandhi National Open University (IGNOU). <a href="https://mercomindia.com/author/rakesh-ranjan-parashar/" rel="noopener noreferrer">More articles from Rakesh Ranjan.</a></p>
</div>
</div></div><div class="clearfix"></div></div></div>

Freight Charges for Solar Module Imports Could Remain High for Six Months or More

krishnapatnam-port

Get the most relevant India solar and clean energy news.

RECENT POSTS