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Solar Topics & Issues

Module buyers bide their time as shipping costs skyrocket

February 3, 2021 PV InfoLink


The pandemic continues to rage in Europe and the U.S., leaving industry struggling to meet demand. The shipping industry benefits from container freight rates that have been rising since last year. Both Shanghai Shipping Exchange’s China Containerized Freight Index (CCFI) and BDI Baltic Exchange Dry Index (BDI) saw increases of more than 100% year-on-year. Rates on the routes from China to the west and the U.S. ended more than 300% higher than in 2019.

According to report from CNBC, rates on the routes from East Asia to Northern Europe surged 264% in December 2020 year-on-year, and that on the routes from Asia to the west coasts of the U.S. soared 145%. The huge hike in ocean freight rates have impacted solar module prices and demand. At present, the shortage of shipping containers is expected to persist until the end of the first quarter, meaning that freight rates will remain high. And as Chinese yuan continue to rise against US dollar, spot prices in overseas markets remain high, slowing end-user demand. As a result, not much new orders are placed recently. InfoLink projects that PV demand will weaken after the Lunar New Year.

China’s trade surplus is the major factor contributing to container shortage. Last December, the economic powerhouse’ exports grew 18.1% from a year earlier (21.1% expansion in November) and posted a trade surplus of $78.1 billion. The increase in exports is ascribed to China’s faster recovery of economy than in the U.S. and Europe, and the comprehensive supply chain that allows it to receive more orders.

Growing demand for China’s goods pushes carriers to focus on the world’s busiest routes, causing unbalanced supply and demand in other routes. Even shipping costs of Southeast Asia routes are rising continuously.

Another reason that causes high shipping costs is the fall in air cargo capacity. The global rate of vacant vessels for container transport has dropped from 12% in the first quarter of 2020 to 1.5% in October, according to data compiled by China Chuandong Association.  The global container fleet, which now exceeds 23 million, has its operating hours reached record high. While new containers have been ordered, it will take at least six to eight weeks for containers to be ready because the pandemic has also disrupted the supply of steel and lumber needed to build containers.

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